Nemaska Lithium Inc.: A Good Candidate For Investing In The Lithium Space

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Written by SmallCapPower.com

Nemaska Lithium Inc. (NMKEF) has proprietary technology to produce low-cost, high-grade lithium carbonates and hydroxides which gives it a leading advantage over its peers and, given the surging demand for lithium, its stock should go to higher levels in the long term. Below is the investment thesis for making such an investment.

About Nemaska Lithium

Nemaska Lithium is engaged in the development of hard rock lithium mining properties in the Eeyou Istchee/James Bay territory in the province of Quebec, Canada and the processing of spodumene into lithium compounds...

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 (all numbers in Canadian dollars)

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. Also consider this TalkMarkets article entitled: Lithium Americas Corp.: Value Pick In The Growing Lithium Space.