Nemaska Lithium Fights Bankruptcy amid Industry Oversupply

Nemaska Lithium (TSX: NMX) of Canada said on Monday that it had applied for creditor protection. In the face industry oversupply, the company had been struggling to find new investors for months to continue operations.

The Montreal-based company's move to avoid becoming the latest victim of an oversupply of metal needed for electric vehicles and high-tech equipment batteries has squeezed this year's market.

While on CCAA, Nemaska Lithium anticipates to review its operations and seeking court approval for a formal investor solicitation process. Through this process, Nemaska's goal is to seek additional financing, sell assets, enter a joint venture, or a combination of options.

The company had been in talks with mining financier the Pallinghurst Group, the investment group led by former BHP boss Brian Gilbertso for a potential C$600 million equity investment, but no agreement has been announced so far.

The stock price, which has been suspended since the announcement of the inclusion of the Quebec Whabouchi project in its conservation and maintenance plan last month, has been steadily falling.

The price of lithium carbonate, the most commonly used battery for electric vehicles, doubled over 2016 and 2017. According to S & P Global Platts, rice prices have fallen by more than 40% since then, to around $9.5 per kilo compared to the $18 per kilo mark they hit in May last year.

The main factor behind the price slump is a large number of new supplies that have flooded the market over the past year, mainly due to mine expansion and the Chinese government's reduction of subsidies for electric vehicle buyers.

Albemarle, the world's largest lithium miner, pointed out in November that prices were down by about a third on last year and that the industry has two or three times more inventory than needed.

To offset the oversupply, Nemaska Lithium postponed plans in August to increase its processing capacity by approximately 125,000 tons. It also revised a deal to acquire Australia's Mineral Resources' (ASX: MIN) Wodgina lithium mine and said it would push back building a 75,000-ton processing capacity at Kemerton, also in Australia.

Chile's Chemical and Mining Society (SQM), the world's second-largest lithium producer, has also made its contribution, delaying a key expansion of the Atacama salt flat business from the end of 2020 to the end of 2021.

The Santiago-based lithium giant said in November that in the three months ended September 30, the company's profits had fallen by nearly 28%.

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