Given the low-cost, high-grade lithium carbonate and hydroxide the Company can produce, we see a lot of value in Nemaska Lithium Inc. (TSX: NMX)
SmallCapPower | August 31, 2017: Nemaska Lithium Inc. (TSX: NMX) is engaged in the exploration and development of hard rock lithium mining properties and processing of spodumene into lithium compounds. The Company owns two mining properties consisting of approximately 60 claims (Whabouchi and Sirmac) in the Eeyou Istchee/James Bay territory, province of Quebec, Canada. Nemaska Lithium also acquired a portion of the land in the Shawinigan Site that will house the Company’s Phase 1 Plant and the Commercial Hydromet Plant that will convert spodumene concentrate into lithium hydroxide and lithium carbonate. The Whabouchi property consists of a block totaling over 33 claims covering an area of approximately 1,761.9 hectares. The Sirmac property consists of over 15 claims, covering approximately 645 hectares. Global demand for lithium is strong and Nemaska Lithium has proprietary technology to produce low-cost, high-grade lithium carbonates and hydroxides. This should spark Nemaska Lithium stock to higher levels in the long term.
Investment Thesis
- Surging demand for lithium
- High-quality lithium hydroxide and carbonate
- Patents on producing low cost, superior lithium hydroxide and carbonates
- Signed agreements for multi-year contracts
Surging demand for lithium
Demand for lithium in 2016 was at 84,000 tonnes LCE (lithium carbonate equivalent). Lithium demand from mega factories was 22,000 tonnes LCE. It’s estimated that at full capacity mega factories would require 132,000 tpa LCE. In 2020, Benchmark Mineral Intelligence forecasts lithium demand from the entire battery market will total 164,000 tonnes LCE. As the demand for lithium increases the prices are expected to go higher as well.
High-quality lithium hydroxide and carbonate
Nemaska Lithium intends to become a lithium hydroxide and lithium carbonate producer and supplier to the emerging lithium battery market that is largely driven by electric vehicles, cell phones, tablets and other consumer products as well as energy storage. The Company is developing significant spodumene lithium hard rock deposits, both in volume and grade, known as the Whabouchi mine. The spodumene concentrate extracted at that mine and produced at the commercial concentrator located on the mine site will be shipped to the Corporation’s hydro-metallurgical processing plant to be built in Shawinigan, Québec, where it will be transformed into high-purity lithium hydroxide and carbonate using the proprietary methods developed by Nemaska Lithium.
The Whabouchi mine and concentrator are expected to be operational around the mid-2018 calendar year and commissioning of the Commercial Hydromet Plant during the first quarter of the calendar year 2019. The current shortage in lithium hydroxide supply puts Nemaska Lithium in a good position to enter the chain of supply.
Patents on producing low cost superior lithium hydroxide and carbonates
Nemaska Lithium owns proprietary processes of producing lithium hydroxide and lithium carbonate, giving it a leading advantage over its peers. The Company has patents for its proprietary processes or improvements for preparing lithium carbonate and lithium hydroxide from spodumene sources using membrane electrolysis. The Corporation also filed additional patent applications, which cover optimization and evolution of the technology as a result of the Corporation’s ongoing optimization programs. Nemaska Lithium has also received confirmation of other patent applications and patent cooperation treaty (PCT) covering such processes that have been published and have received PCT numbers. The main benefits of these processes include: low and predictable operating costs; eliminates costly reagents such as soda ash thus eliminating sodium sulfate by-product, which has no market value and is environmentally harmful; and significant reduction of green–house gas emissions (GHG).
Signed agreements for multi-year contracts
Nemaska Lithium has signed multi-year contracts for quantities, which account for ~50% of annual production with Johnson Matthey Battery Materials and FMC. The contracts are a combination of fixed and market pricing.
Financial Performance
Nemaska Lithium reported a comprehensive loss of $2.4 million, or $0.008 per share, in quarter ending March ’17 as compared to $0.5 million, or $0.002 per share, in the year-ago quarter. As at March 31, 2017, the total assets of the Company were at $158.8 million as compared to $63.5 million on June ’2016. Cash and cash equivalents stood at $32.9 million as on March 31, 2017.
Outlook
Given the low-cost, high-grade lithium carbonate and hydroxide the Company can produce, we see a lot of value in Nemaska Lithium. The lithium market is strong, as demand outweighs the current supply. We see lithium prices and volumes growing exponentially in the future. Nemaska Lithium can be considered a good candidate for investors looking to get into the lithium space.
Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own shares in the company mentioned above.
The Content contained on this page (including any facts, views, opinions, recommendations, description of, or references to, products or securities) made available by SmallCapPower/Ubika Research is for information purposes only and is not tailored to the needs or circumstances of any particular person. Any mention of a particular security is merely a general discussion of the merits and risks associated there with and is not to be used or construed as an offer to sell, a solicitation of an offer to buy, or an endorsement, recommendation, or sponsorship of any entity or security by SmallCapPower/Ubika Research. To read more of this Disclaimer please click on the button below:
