NEMASKA LITHIUM COM NPV (OTCMKTS:NMKEF) Is Today's Lithium Focus

Did you not notice the astonishing increase in volume registered in shares of Nemaska Lithium Com NPV (OTCMKTS:NMKEF)? The mining operator headquartered in Canada did not release news that justified the move, thus we became very interested in the company.SourceComments were added on the Yahoo Finance Forum wondering about the volume and no explanation was found on the iHub forum. Let us note here what other forum participants said on July 11, 2017:

"Volume was 1.36 million shares - about 10x what what NMKEF usually sees & an up day. We are going to see a VERY nice pop from here folks!" Yahoo Finance Conversations

We don't think that a rising volume means that the company may "pop" in the future. Thus, since we see a lot of misunderstandings in the market, in this piece, we will try to assess what may be happening with the company.BusinessSourceNMKEF, which is also listed in the Toronto Stock Exchange under the symbol NMX, focuses on "the exploration and evaluation of hard rock lithium mining properties and related processing of spodumene into lithium compounds". It operates in Québec, Canada.Among its mining properties, the most relevant is Whabouchi. According to a NI‐43‐101 feasibility study update, which was released to the market on April 4, 2016, the property has reserves that are economically recoverable.What is needed to commence the development of the mine in Whabouchi? The company stated in the last annual report that "it has not yet obtain all the required financing to start the construction and development phase of the Whabouchi Project". The necessary financing for the project was also included in the same document:

"A substantial amount of additional financing is required for construction of a lithium mine at the Whabouchi Project near the Cree community of Nemaska. The estimated capital cost for the project is in excess of $500 million, including contingencies." Source

SourceThe company has other projects that can be found on the website, but we preferred to focus on this one as it's the most promising one in the opinion of the company. The key to understand its importance is the large amount of lithium contained in the Whabouchi deposit.Expected Mine Life26 years (2016 Feasibility Study)26 years (2014 Feasibility Study)Life of Mine Revenue$9.2 Billion (US$7.4B)(average of $354M/yr)$6.9 Billion (US$6.2B)(average of $267M/yr)Pre-Tax Net Undiscounted Cash FlowAfter-Tax Undiscounted Cash Flow$6.2 Billion (US$4.9 B)(avg. of $260M/yr before initial CAPEX)3.9 Billion (US$3.1B)$3.4 Billion (US$3.1B)(avg. of $151M/yr before initial CAPEX)2.3 Billion (US$2.1B)Pre-Tax NPV 8% Discount (base case)After-Tax NPV 8% Discount (base case)$1.9 Billion (US$1.5B)$1.16 Billion (US$928 M)$964 Million (US$831 M)$581 Million ($523 M)Pre-Tax Internal Rate of Return (IRR)After-Tax Internal Rate of Return (IRR)37.7%30.3%25.2%21%Total Initial Capital Costs$549 Million (US$439M) in CAPEXincluding Contingency$500 Million (US$450M) in CAPEXincluding in ContingencyPay Back of Capital Costs2.4 years3.7 yearsSelling Price Lithium HydroxideUS $9,500/t FOB ShawiniganUS $8,000/t FOB ValleyfieldSelling Price Lithium CarbonateUS $7,000/t FOB ShawiniganUS $5,000/t FOB ValleyfieldAverage Cost Per TonneSpodumene Concentrate$181/t (US$145/t)FOB Whabouchi Mine$189/t (US$170/t)FOB Whabouchi MineAverage Cost Per TonneLithium Hydroxide$2,693/t (US$2,154/t)FOB Shawinigan$3,450/t (US$3,105/t)FOB ValleyfieldAverage Cost Per TonneLithium Carbonate$3,441/t (US$2,753/t)FOB Shawinigan$4,190/t (US$3,771/t)FOB ValleyfieldExchange Rate $C to $US1 : 0.81 : 0.9SourceWhy is lithium so relevant?Lithium is necessary for the manufacturing of batteries used in cell phones, laptops, and other devices. Hence, the mining of this material is becoming a very profitable business in the present time. The expectations for the sector are quite high. There are many companies trying to profit from the increase in lithium demand. We have assessed some of the most interesting ones in InsiderFinancial. Readers may read some of our articles to get to know more opportunities out there.Have a look at the expected world lithium demand in the next 40 years:SourceRecent developmentsOn June 20, 2017, it was put out that 3.5t of lithium hydroxide had been sent to Johnson Matthey Plc. The company that received the mineral confirmed that it meets the specifications required. Guy Bourassa, President, and CEO of Nemaska Lithium, celebrated that NMKEF's lithium hydroxide product is being accepted by the lithium-ion batteries manufacturers:

"We are very pleased to have delivered a high quality lithium hydroxide product that meets the stringent specifications of Johnson Matthey, a large and globally recognized cathode manufacturer for lithium-ion batteries" Source

In addition, Nemaska Lithium put out an update about the Phase 1 Plant Operations.

"The Phase 1 Plant installation and commissioning has gone very well as evidenced by this delivery of product. We look forward to sending other customers lithium salts this summer for evaluation." Source

On May 18, 2017, the company announced that it had received four additional issued patents and two additional allowed patent applications. The new patents are related to processes for preparing lithium hydroxide, methods for treating lithium-containing materials, and to a process for preparing lithium carbonate. Patents were provided from the Canadian Government, the United States Patent and Trademark Office. Jean-Francois Magnan, Technical Manager of Nemaska Lithium, said the following about the news:

"These granted patents clearly confirm the uniqueness of our processes that allow us to produce low cost, high purity lithium salts in an environmentally friendly manner. We have considerably strengthened our patent position with respect to protecting our lithium hydroxide and lithium carbonate manufacturing processes in Canada, USA and Australia, which are the major centres for hard rock lithium production." Source

Financial situation - Cash and little debtWe had a look at the financial situation of the company. We found a lot of cash on the balance sheet and very little debt. This is good and quite unusual in penny stock land. Mining companies tend to be highly leveraged, thus sometimes the financial risk is high. This is not the case:Total Cash (mrq)25.31MTotal Cash Per Share (mrq)0.08Total Debt (mrq)1.31MTotal Debt/Equity (mrq)1.56Current Ratio (mrq)2.22Book Value Per Share (mrq)0.26SourceMarket participants declared big stakesThe following market participants reported stakes in the company. The lithium project seems to have seduced them.HolderSharesDate Reported% OutValueGlobal X Fds-Global X Lithium ETF3,110,120Apr 29, 20170.82%2,710,469VanEck Vectors ETF Tr-Rare Earth/Strategic Metals ETF2,888,444Apr 29, 20170.77%2,517,278U.S. Global Investors Fund-World Precious Minerals Fund500,000Dec 30, 20160.13%457,774BlackRock Commodity Strategy Fd35,926Jan 30, 20170.01%38,760SourceWhat could be happening and ConclusionThere are many things that could create such a large volume in the exchange. Perhaps the current shareholders decided to buy more shares in the open market. Also, a partner may be interested in the project and may be negotiating a deal with the company. Another possibility may be that the patents may be appealing to another mining group and negotiations may going on. Finally, the company may announce something big soon and the expectation may have created such a large volume. Anything can be happening. To sum up, try to follow the company closely. We may get to know the answer to all these questions soon.We will updating out subscribers as soon as we know more. For the latest updates on NMKEF, sign up below!Image courtesy of Thomas Hawk via FlickrDisclosure: We have no position in NMKEF and have not been compensated for this article.