In an ideal world, the government of François Legault wants Quebec interests to take over mining. (Photo: Getty Images)
GEOPOLITICAL ANALYSIS – The Legault government will soon decide who will take over the activities of Lithium America North (LAN) in La Corne, near Val-d’Or, in Abitibi-Témiscamingue. The stakes are high, because this decision could determine Quebec’s role in the global lithium value chain, a highly strategic mineral for ecological transition.
The mining company is under the protection of the Companies’ Creditors Arrangement Act since May 2019. It is controlled by the Chinese battery manufacturer CATL and Investissement Québec (the financial arm of the government), the two shareholders having secured debts.
LAN is looking for an investor to take the place of the Chinese Jien International Investment (the third shareholder, without secured debt), which had bought Quebec Lithium in 2018 with IQ.
The setbacks of this mine over the years are mainly due to the poor characteristics of the ore which makes it very difficult to produce quality lithium, which prevents the mine from obtaining a good price on the market.
Significant investments will therefore be required to relaunch the mine and improve the quality of the lithium produced.
According to information gathered from four industry sources or close to the file in Quebec, three companies are still in the race to buy the mining company in Abitibi-Témiscamingue: possibly a Quebec company and two foreign companies.
In total, five companies have presented a formal purchase offer to the trustee Raymond Chabot to take over the La Corne mining company, according to information compiled by Deals and the Journal of Montreal.
They are Sayona Quebec, Central America Nickel, SRG Mining, Evolution Metals Corporation and the Andrien Pouliot / Mercuria / Nathaniel Klein consortium.
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Potential Quebec buyers
Revealed by the Journal of Montreal, the Adrien Pouliot / Mercuria / Nathaniel Klein consortium can be partially considered as a Quebec buyer due to the presence of Adrien Pouliot.
He is the outgoing leader of the Conservative Party of Quebec, and heir son of Jean Pouliot, former boss of the Télé-Métropole, CFCF and TQS television channels.
According to our information, Adrien Pouliot knows Nathaniel Klein very well, 2nd associate partner at NK Investments in New York. In 2016, this American financier bought Quebec lithium, then sold it in 2018 to CALT, Investissement Québec and Jien International Investment.
Mercuria, for its part, is a Swiss group active in the energy and base metals sectors in more than 50 countries, including Canada, with the Alberta natural gas producer Canlin Energy Corporation.
In base metals, Mercuria markets copper, aluminum, lead, zinc, nickel and tin in Asia, Europe and the Americas.
The other company that we can consider Quebecois is SRG Mining, whose head office is in Town of Mount-Royal, on the island of Montreal.
The boss is Benoît Lasalle, the founder of SEMAFO, a Canadian gold producer in West Africa, which was acquired in 2020 by Endeavor Mining. Among the shareholders of SRG Mining are CDS & Co, in Toronto, and Coris Capital, a company registered in Mauritius, according to the Registraire des entreprises.
The mining company has two mining projects in Guinea, West Africa. The first is in graphite, the second in base metals. She has no production activity at the moment. Canadian financiers support his plan to buy Lithium America from North America, including the National Bank.
Central America Nickel, headquartered in Montreal, can also be considered a Quebec buyer. This company does not currently operate a mine either.
Its chairman is Pierre Gauthier, the company’s first majority shareholder, according to the Registraire des entreprises.
He is also the founder and CEO of Seed Capital inc. (SEED), a venture capital fund that has financed mining projects located in French Guiana, Brazil, Colombia, Mexico, Russia, Congo and Cuba.
Central America Nickel presents itself as a mining company specializing in the treatment and purification of so-called energetic metals such as nickel, cobalt and copper. The mining company claims to control “substantial reserves” of these metals.
Currently shut down, the Lithium North America mine at La Corne, in Abitibi-Témiscamingue, has already produced 180,000 tonnes of lithium concentrates between August 2017 and February 2019. (Photo: Lithium North America)
Potential foreign buyers
Sayona Quebec is the subsidiary of the Australian Sayona Mining.
This mining company already has two projects in Abitibi-Témiscamingue: the Authier Lithium project (extraction and concentration of ore containing lithium) and the Transim project, a property on which the company holds mining titles.
Neither Sayona Quebec nor Sayona Mining currently operates a mine. On the other hand, the founders of Sayona Mining (including engineers) are alumni of Altura Mining, an Australian company producing lithium.
Evolution Metals Coporation is an American non-mining mining, refining and chemicals company. She has publicly stated that the US government supports her plan to buy Lithium from North America.
The Pentagon – the US Department of Defense – seems to have an influence on the strategic directions of this company, headed by David Wilcox, according to information collected by Deals.
Two strategic advisers from Evolution Metals Coporation have already worked in the US government, including Andrew F. Knaggs, currently COO at PACEM International, a Virginia firm that produces munitions, among other things. He has twice held senior positions at the Pentagon.
Mr. Wilcox has no experience in the mining industry. He is a financier who has held many positions in the field of private investment around the world, notably at Deutsche Bank.
Greg Smith, Evolution Metals Coporation’s COO, is the only executive officer with mining industry experience. Most recently, he led Endomines, a Swedish gold mining company with projects in Finland and the United States, Idaho.
It is not impossible, moreover, that Chinese interests retain control of Lithium North America. According to an industry source, CALT may be interested in remaining in LAN capital, but without having to deal with the operation of the mine at La Corne.
Jilin Jien Nickel Industry, owner of Canadian Royalties, which operates two nickel mines in Nunavik, in Nord-du-Québec, could also covet the mine in Abitibi-Témiscamingue, according to another source.
This company is part of the same Chinese holding company as Jien International Investment, one of the three shareholders of Lithium North America.
However, it has not been possible to confirm whether Chinese interests have made a formal offer to remain or enter the capital of LAN.
François Legault’s ideal scenario
That said, it seems unlikely that the government will let Chinese investors keep or buy Lithium North America.
In August 2020, Prime Minister François Legault made a statement – in another file concerning a lithium project in Quebec – which leaves little doubt about his preferences.
“If we want to be able to build batteries [au Québec], it starts with lithium. I would not want this sector to be given to the Chinese or to foreign companies. ”
He was then answering a question from Journal of Montreal on the government’s decision to get involved in the rescue of Nemaska Lithium, which also had to put itself under the protection of the Companies’ Creditors Arrangement Act.
In an ideal world, the Legault government wants Quebec interests to take over LAN, because it wants to develop an electric battery industry in Quebec, in lithium and graphite.
On the other hand, according to sources, the government would not be ready to do it at all costs, that is to say by injecting new public funds into the relaunch of Lithium North America – IQ has already invested or granted $ 100 million in this adventure.
Finally, there remains another option for François Legault: cede LAN to Western interests (American, European, Australian) – read between the lines of the allied countries. This would notably make it possible to promote foreign investment in Quebec, according to government offices.
On the other hand, this option would come with a certain risk of missing the train of the secondary transformation of lithium in Quebec, that is to say to produce lithium carbonates and hydroxides.
As a foreign buyer would undoubtedly have part of his value chain abroad, he could therefore be tempted to carry out the secondary processing of lithium outside Quebec, in the United States, for example.
Nothing in this context to really encourage a battery manufacturer to set up in Quebec, if we only extract lithium from the ground (primary processing) and the value chain is incomplete (the absence of secondary processing).