An April 6 research note indicated that SoftBank Group has agreed to invest up to CA$99 million in Nemaska Lithium Inc. (NMX:TSX; NMKEF:OTCQX). The vehicle is a private placement of 88.5 million common shares subscription receipts at $1.12 per share. "SoftBank's investment is an important project endorsement, providing credibility for Nemaska to pursue and close additional equity and debt financing options," wrote analyst Ryan Walker with Echelon Wealth Partners.
SoftBank Group is a US$78 billion, Japanese-based multinational conglomerate holding company whose business divisions include energy, mobile, Internet, robot and business.
As for the details of the SoftBank-Nemaska arrangement, the gross proceeds of the placement would be held in escrow until, for one, Nemaska completes additional financing. The company needs a total of $775–825 million for the commercial-scale Shawinigan plant, the Wabouchi mine (both located in Quebec) and working capital.
Walker explained that "if the escrow release conditions are not met or waived by Aug. 6, 2018, the funds would revert to SoftBank and the financing automatically canceled." If all stipulations are met and the financing gets completed, SoftBank would have the right to own 9.9% of Nemaska.
At that point, should SoftBank owns at least a 5% interest in Nemaska, it would have these additional rights:
- The right of first offer to purchase up to 20% of the lithium hydroxide and carbonate produced at the Shawinigan plant from Wabouchi "at pre-agreed discounts applicable to a pre-determined price-based formula," said Walker.
- The right to one nominee for director of Nemaska.
- The right to participate in any future equity offerings.
Nemaska continues working on obtaining supplementary financing, "including US$300–350M in debt, closure of a recently announced US$150M streaming facility and additional private and/or public equity," Walker noted.
He added that Echelon is confident the lithium firm will accomplish the needed capital, particularly with the confidence boost from Softbank. Were Nemaska to complete all additional financing by early August, then the plant and mine would be on track for commercial production in H2/20.
Echelon has a Speculative Buy rating and a CA$3 per share price target on Nemaska Lithium. The company's shares are currently trading at around CA$1.32 per share.
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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Echelon Wealth Partners, Nemaska Lithium Inc., Apr. 6, 2018
Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.
I, Ryan Walker, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer? Yes
During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? Yes