VANCOUVER (miningweekly.com) – Quebec-based lithium producer Nemaska Lithium has secured a $150-million streaming financing deal with private lender Orion Mine Finance Group.
Under the terms of the streaming deal, Orion will take 14.5% of the lithium hydroxide and lithium carbonate produced at the Shawinigan electrochemical plant and that are sold to third parties. Orion will pay Nemaska 40% of the sales proceeds of the stream products, with Nemaska acting as Orion's agent in selling the products to third-party offtakers.
This arrangement allows Orion to capture 60% of the revenues generated, which translates to a net portion of about 8.7% of the stream product sales. The stream products will be capped at the equivalent of 5 000 t of refined lithium products.
"We have made solid progress in our project financing endeavours over the past couple of weeks, firstly with a private placement with SoftBank, a global technology leader, and now with the signing of this agreement with Orion, a leading and well-regarded financier in the mining industry," Nemaska president and CEO Guy Bourassa commented in a statement last week.
He talked up the streaming deal as a financing tool that limits shareholder dilution, lowers Nemaska’s cost of capital, and is under terms, he thinks, are both competitive and flexible.
The advance payment will be released in two equal tranches of $75-million, with the first tranche expected to be payable once the project financing is in place and after Nemaska has satisfied certain other customary conditions that it expects to fulfil soon after finalising project financing.
The alternative funding gurus at Orion have a penchant for providing streaming deals for compelling start-up projects as part of a larger funding package comprising several instruments. This deal forms part of a package of financing options the company is pursuing to finalise the structuring of the $775-million to $825-million pre-production capital required to develop the Whabouchi lithium mine and Shawinigan electrochemical plant.
Since filing a recent C$500-million prospectus, the company has made good progress over the past several weeks, raising C$99-million through a private placement with SoftBank Group to hold no more than 9.9% of the shares outstanding once the project financing is completed. The company says more equity financing is on the table, with the balance to be made up of $300-million to $350-million in debt – the details of which it is feverishly working to finalise.
Eight Capital analyst David Talbot says the deal further validates the lithium sector as an opportunity for large and established multibillion-dollar companies. "This is the fifth significant lithium deal of the year, highlighted by the $287-million investment by Toyota Tsusho into Orocobre and the C$265-million acquisition of Lithium X by NextView. It is a signal to investors yet to deploy capital into this emerging growth sector that the lithium market is expanding," he said in a note to client, adding that the safe jurisdiction of Canada, and Quebec in particular, should also be a motivator for investors.