‘Out with the old and in with the new’ is an adage often attached to the beginning of a new year, and for Nemaska Lithium at the start of 2018 it couldn’t have rung any truer. Barely two weeks into the new year the TSX-listed company released an updated feasibility study for its Whabouchi project in Quebec, an area that contains some of the largest and richest spodumene hard rock lithium deposits in the world. Nemaska Lithium’s president and CEO Guy Bourassa, speaks to RGN about the improved project metrics outlined in the feasibility and how the vertically integrated company will become one of the largest battery grade lithium salt suppliers in the world when Whabouchi reaches commercial production.
2018 feasibility study
After completing an extensive diamond drilling programme throughout 2016/17, Nemaska Lithium’s 2018 feasibility charted a host of enhanced project metrics, including an increased life of mine production to 7Mt of spodumene concentrate at a rate of 6.25% Li2O, up from 5.5Mt outlined in the 2016 feasibility. The expected mine life was also extended from 26 to 33 years.
In addition, the company raised the overall capacity of its electrochemical plant by 20%, going from a capacity of 27,400 tonnes of lithium carbonate equivalent (LCE) per year to 33,000 tonnes LCE per year.
“Initially in 2016 we had the capacity to produce 3,250 tonnes per year of lithium carbonate and the rest of our production capacity was lithium hydroxide,” says Bourassa. “But because of the signing of offtake agreements for lithium carbonate in 2017 and our discussions with other potential clients, we realised it was important that we could produce more carbonate from our plant.
“This, along with our continuous assessment of the market, prompted our decision to add flexibility and increase our carbonate production capacity by a factor of five to 16,000 tonnes per year [up from 3,250 tonnes per year].”
Nemaska Lithium’s electrochemical plant is located in the city of Shawinigan, Quebec and will process spodumene concentrate extracted from the mine site near the town of Nemaska and develop it into two usable end product salts; lithium carbonate and lithium hydroxide, thus confirming the company’s positioning as a fully integrated lithium supplier.
Both forms of lithium salts are used in the making of lithium-ion batteries, particularly high energy density batteries found in electric vehicles, although cathodes with high nickel content only work with lithium hydroxide salt while cathodes with a lower nickel chemistry can use either hydroxide or carbonate. However, both are currently in high demand by OEM car battery manufacturers and other large cathode makers.
While recent rises in demand for lithium carbonate shaped Nemaska Lithium’s decision to increase its carbonate capacity, the company has maintained its capability to produce up to 100% lithium hydroxide and boosted its capacity by 20% to 33,000 tonnes of lithium carbonate equivalent (LCE) per year, providing further flexibility to its customers from the OEM large battery manufacturing sector.
Raising the capital required to construct the mine and the electrochemical plant has always been one of the biggest barriers to overcome for Nemaska Lithium, however in early 2018 Bourassa revealed his confidence in securing the full US$616million CAPEX project financing by the first quarter of this year.
“We are still working on a 60:40 debt equity ratio. We have already had very advanced discussions with banks private lenders and institutions that are interested in the project financing,” he says.
Nemaska has not just received attention from a range of investors, but also from the end user market, primarily from the lithium battery and production space.
The company has maintained an open-minded approach to distribution, negotiating with several large end users and potential strategic partners from Asian, North American and European markets, building on the two supply deals it signed back in 2015 with Johnson Matthey (JM) and FMC Lithium.
This brings us to Nemaska Lithium’s other major news release of 2018. On January 8th the company confirmed that a second shipment of battery grade lithium hydroxide had been delivered to JM from its Phase 1 plant in Shawinigan.
Battery grade lithium
“We have achieved a very significant milestone here,” says Bourassa referring to the successful processing of spodumene concentrate at its small-scale demonstration plant and the subsequent delivery of the end product to its partner.
“We are the only emerging producer that has decided to make a demonstration plant of a good size.
“People were doubtful about the feasibility of having a good product with our electrochemical process. However, the fact that we built it [the phase 1 plant], commissioned it and started the operation and were finally able to deliver a very high purity lithium hydroxide to our initial client, that was a real eye-opener for a lot of people.”
Proving doubters wrong was not the only reason for the Phase 1 plant decision. Along with being able to qualify its end product with its customers, Nemaska Lithium has also been able to weave in all the additional test work and data from the plant into its updated feasibility, painting a much more detailed and accurate picture of the overall project.
Consequently, all the additional information gathered from the Phase 1 plant has contributed to a significant de-risking of Nemaska Lithium’s processing method and the de-risking of the construction and start-up of the commercial plant.
“That’s why designing and building the Phase 1 plant was a very sound decision. Now we’ve been able to confirm the quality of the product to a third-party client and end user, which is a very big milestone for any company,” Bourassa comments.
Nemaska Lithium also released the purity specifications of its product, the details of which are often a make or break factor for the end user, as the impurities in the lithium content must be within certain level for the product to perform at an acceptable standard.
“We took the average minimum and maximum acceptable level of impurities outlined in the current industry standards guideline and compared them to our product. The results show that we exceed the highest standards on the market. That was a great achievement and we are very satisfied with this.”
Equipped with these impressive figures, Nemaska Lithium can further venture into the OEM large battery market, armed with a guarantee that it can supply the highest quality lithium currently on the market to any potential customer.
A global supply deficit
Recent years have seen a steady lithium supply deficit emerge and this pattern is likely to continue for the next two to three years according to Bourassa, as supplies are squeezed by increasing demand from the fast growing EV market.
Delving deeper into the complex factors shaping the current lithium supply outlook, Bourassa explains how there are two types of newcomers in the global supply market. There is a limited number of vertically integrated companies like Nemaska Lithium, but a large number of spodumene concentrate producers.
Of the latter, a significant number of Australian producers are set to come online over the next few years, targeting the less-stringent domestic Chinese cathode manufacturing market. However, these spodumene producers are a red herring for those who see them as a solution to the global lithium supply deficit.
“Currently there is a need to have additional conversion capacities to be built in China to be able to convert this additional spodumene coming from Australia.
“That’s why we have taken the decision to build a Phase 1 plant in the first place to pre-qualify our product ahead of the start of the commercial operation, so that we can more rapidly enter the chain of supply.”
Therefore, Nemaska Lithium is set to enjoy a big head start on its competitors over the next few years as additional raw lithium processing capacity comes online, thanks to its ability to supply end product lithium to battery manufacturers from its electrochemical processing plant.
Being vertically integrated also allows Nemaska Lithium to not only compete with other leading lithium producers, but also gain a major advantage over suppliers in China and Chile from a production cost perspective.
“Having our spodumene conversion done in the same province gives us a cost advantage of at least 55% of Chinese supply,” Bourassa claims. “Then because we have an electrochemical process instead of a conventional chemical process, we also have an advantage on the conversion cost, which allows us to compete with the lowest cost brine producers of Chile.
The likes of Albemarle and SQM in Chile use a more laborious chemical process to make lithium hydroxide which contributes to a total processing cost that could be as much as $1,700 more than Nemaska Lithium’s conversion cost, says Bourassa.
Aside from drastically improving the project’s economics, the electrochemical process can also be used to remove impurities from the spodumene concentrate before making the conversion, resulting in Nemaska Lithium’s end product achieving industry-high purity levels.
For example, when the company produces lithium carbonate out of its lithium hydroxide solution, the immediate result is a 99.99% pure product.
“Furthermore, if you compare our electrochemical process to the conventional chemical process for the same tonnes of finished product we use about 75% less sulphuric acid and produce up to 80% less by-products that have no commercial value.
“So, because of the process itself we have a less costly product, we have a higher purity product and we are by far the greenest way of making lithium salts.”
Now that Nemaska Lithium is close to finalising project financing, it will look to resume construction of the mine site, having previously undertaken some preliminary work, with a schedule of 9-12 months before commissioning the mine and starting operations.
The construction of the electrochemical plant is currently scheduled at 18-24 months, meaning there will be around a year between the completion of the mine and the plant. In order to fill this gap, Nemaska Lithium has entered into discussions with end users in Asia looking to secure spodumene concentrate.
Within the first two weeks of 2018, Nemaska Lithium showcased its capabilities as a world-class, vertically integrated player in the lithium-ion battery space through the successful shipment of battery grade lithium to its client JM, and also confirmed it is within touching distance of securing the all-important financing for its Whabouchi project.
Thanks to the improved metrics contained in its 2018 feasibility study, Bourassa is imbued with an even stronger belief that the project can deliver globally significant quantities of high grade, end product to an increasingly voracious market of lithium-ion battery producers, ahead of the EV revolution.
“We do believe that we will be the largest lithium hydroxide battery grade producer by 2020-21, and we should represent between 20-30% of worldwide lithium hydroxide supply that is battery grade.”