Nemaska Lithium has announced an update on the Whabouchi lithium mine and the Shawinigan lithium processing facility, stating that a further C$375M (US$283.4M) would be required to fully-fund construction, commissioning, working capital and reserve funds. The additional funds would be needed on-top of an existing C$1.1Bn (US$831.4M) finance package announced in May 2018, which includes elements requiring the project to be fully funded prior to any draw down of funds. The increase in CAPEX increases the CAPEX to capacity cost at Nemaska by 34% to US$47,200/t.
The additional costs were reported by Nemaska’s President Guy Bourassa to be largely the result of increased indirect costs, which have been reassessed as firm quotes for work have been received. Greater overburden and soil removal at the Whabouchi site, requirements for contractor accommodation, and higher labour costs are all reported to be contributing factors. Increasing steel prices have also impacted costs; Nemaska has identified changes to steel-grade requirements for equipment at the Shawinigan plant in order to mitigate corrosion and damage to tanks and piping during operation. Overall, additional costs at the Shawinigan plant were reported to account for roughly two thirds of the total cost increases, with the Whabouchi mine forming the remainder.
Guy Bourassa said at the time that the company’s objective “remains to close the required financing on time to stay on target to complete mine construction in October 2019, in order to make the first shipment of spodumene concentrate in December 2019, followed by the start-up of the Shawinigan facility the year after.
Nemaska's stock fell over 35% on the day the update was released.
The lack of access to a large portion of the existing finance package without a fully funded project is a significant concern, with the clock already ticking for Nemaska to raise the required additional funds through either dilutive or non-dilutive methods. The CAPEX revision as a major set-back, though not a death-blow, as Nemaska maintains an attractive position on the lithium cost curve with strong off-take partners.