In a June 4 research note, Canaccord Genuity analyst Eric Zaunscherb reported that as of May 30, Nemaska Lithium Inc. (NMX:TSX; NMKEF:OTCQX) completed a multipart, CA$1.1 billion financing for its Whabouchi mine and Shawinigan electrochemical facility, thereby derisking the project.
There were four components to the financing, the last of which was a targeted $360 million equity raise comprised of a $280 million public offering of common shares on a bought deal and a concurrent $80 million private placement with Ressources Québec, Zaunscherb explained. The equity raise price, at CA$1 a share, was lower than expected. Due to that and the fact that 360 million shares remained unissued, the transaction was more dilutive to Nemaska's net asset value than expected.
The other three pieces of the financing, Zaunscherb said, were:
- $150 million in prepayment on a streaming agreement with Orion Mine Finance II Limited Partnership
- $77 million from Japan's SoftBank Group purchase of a 9.9% strategic equity interest in Nemaska, an offtake agreement on 20% of the energy company's production and a board seat
- $350 million from a five-year term bond issue
The analyst noted the financing occurred during a "difficult time for lithium equities, which have dropped by an average of 55% since the beginning of the year, despite a 13% increase in lithium price."
Ultimately, Zaunscherb concluded, the financing "was a positive step in advancing Nemaska's projects. Now, the company can "take a step forward and shift its focus to continued development."
Already, Nemaska has the Shawinigan plant running and is working on achieving a continuous 500 tons per day rate. Phase 2 construction and commissioning of Whabouchi and Shawinigan are slated for completion in 15 and 24 months, respectively.
In other news, the lithium company, on May 29, agreed to supply spodumene concentrate to two companies, Hanwa Co. in Japan and GLC in China. This will allow Nemaska to sell the product while its mine is producing but its plant has not yet been commissioned. "This agreement is another confirmation that Nemaska is focused on and ready for the future of this project," Zaunscherb wrote.
Finally, Nemaska added to its board two "strong" directors, as described by Zaunscherb, one from Ressources Québec and the other from SoftBank.
Canaccord Genuity maintained its Speculative Buy rating on Nemaska but lowered its per share price target to CA$1.70 from CA$2 to reflect the financing impact. The company is currently trading at around CA$0.99 per share.
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Disclosures from Canaccord Genuity, Nemaska Lithium Inc., June 4, 2018
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Required Company-Specific Disclosures (as of date of this publication):
Nemaska Lithium Inc. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Nemaska Lithium Inc.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Nemaska Lithium Inc.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Nemaska Lithium Inc. in the next three months.
An analyst has visited the material operations of Nemaska Lithium Inc.. Partial payment was received for the related travel costs.
Disclosures are available here.