10-K/A: Arcadium Lithium Amends 10-K to Include Nemaska Lithium Financials After Gaining Control

Arcadium Lithium files an amendment to its 2023 annual report to include the financial statements of Nemaska Lithium, reflecting Arcadium's increased control and consolidation of the joint venture.

Summary

• Arcadium Lithium plc is filing an amendment to its original 10-K report for the year ended December 31, 2023.
• The amendment includes the annual financial statements and related notes of Nemaska Lithium, Inc. (NLI) as at and for the fiscal year ended December 31, 2022.
• Arcadium Lithium has a 50% ownership interest in NLI.
• On October 18, 2023, Arcadium Lithium amended its shareholders agreement with NLI, giving its subsidiary Qubec Lithium Partners (QLP) control of substantive participating rights.
• As a result, Arcadium Lithium began to consolidate NLI as of October 18, 2023.
• NLI met the significant subsidiary test for the fiscal year ended December 31, 2022, requiring separate financial statements to be filed.
• The amended 10-K includes NLI's audited financial statements for the fiscal year ended December 31, 2022, and unaudited financial statements for the fiscal year ended December 31, 2021.
• The amendment also includes the consent of NLI's independent auditor and certifications by Arcadium Lithium's CEO and CFO.
• The amendment does not update any other exhibits or reflect events that occurred after the filing date of the original 10-K.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While Arcadium Lithium is consolidating a key asset, Nemaska Lithium's financials reveal ongoing losses and a need for additional funding, creating uncertainty.

Positives

• Arcadium Lithium has gained control of Nemaska Lithium, allowing for consolidation of its financials.
• The inclusion of Nemaska Lithium's financials provides more transparency into Arcadium Lithium's operations.

Negatives

• Nemaska Lithium had a working capital deficit of $13,333 as of December 31, 2022.
• Nemaska Lithium incurred a loss of $69,628 and negative operating cash flows of $64,084 for the year ended December 31, 2022.
• Nemaska Lithium has not generated any revenues to date.
• Nemaska Lithium's future operations are dependent and concentrated in the Commercial Project.
• Management believes that without additional funding, the Corporation does not have sufficient liquidity to pursue its planned expenditures for the next twelve months following the date of issuance of these financial statements, which includes the continued construction of the Commercial Project.
• These factors indicate that substantial doubt exists about the Corporation's ability to continue as a going concern.

Risks

• Nemaska Lithium's ability to continue operations depends on developing the Commercial Project, achieving profitable operations, and continued financial support from shareholders.
• There is no assurance that Nemaska Lithium will be able to secure additional financing in the future.
• The financial statements of Nemaska Lithium do not include any adjustments to the carrying values of assets and liabilities that might result from the outcome of the uncertainty about its ability to continue as a going concern.

Future Outlook

Nemaska Lithium's future operations depend on developing the Commercial Project, achieving profitable operations, and continued financial support from its shareholders. Management plans to secure additional financing, mainly through share subscriptions from current shareholders.

Management Comments

• Management believes that without additional funding, the Corporation does not have sufficient liquidity to pursue its planned expenditures for the next twelve months following the date of issuance of these financial statements, which includes the continued construction of the Commercial Project.

Industry Context

The announcement reflects the ongoing consolidation and development of lithium projects globally, as companies seek to secure supply chains for the growing electric vehicle battery market. Arcadium Lithium's move to consolidate Nemaska Lithium aligns with this trend, aiming to streamline operations and increase control over lithium production.

Comparison to Industry Standards

• It's difficult to directly compare Nemaska Lithium's results to industry standards due to its development stage and lack of revenue.
• However, the reported losses and negative cash flows are not uncommon for companies in the early stages of developing mining projects.
• Companies like Lithium Americas (LAC) and Piedmont Lithium (PLL) have also experienced significant losses during their development phases.
• The key will be Nemaska Lithium's ability to successfully complete its Commercial Project and achieve commercial production, at which point its financial performance can be more readily compared to established lithium producers like Albemarle (ALB) and SQM.

Related Party Transactions

• Management fees amounting to $2,590 were paid to TPG in connection with their role as initial manager following the CCAA restructuring in 2022 (2021 $2,522).
• The transactions were conducted at the exchange amount, which is the amount determined by the parties.

Stakeholder Impact

• Shareholders: The consolidation of Nemaska Lithium could potentially benefit shareholders if the project becomes profitable, but the current financial situation of Nemaska Lithium presents risks.
• Employees: The future of Nemaska Lithium's employees depends on the company securing additional funding and successfully completing the Commercial Project.
• Customers: The long-term agreement with a customer for the supply of lithium products is a positive sign, but the company needs to start production to fulfill the agreement.
• Creditors: Nemaska Lithium's ability to repay its debts depends on securing additional financing and achieving profitable operations.

Next Steps

• Nemaska Lithium needs to continue developing the Whabouchi mine and the Bcancour conversion facility.
• Nemaska Lithium needs to secure additional financing to complete the Commercial Project.
• Nemaska Lithium needs to achieve commercial production and profitable operations.

Key Dates

Keywords

Arcadium Lithium, Nemaska Lithium, 10-K/A, Financial Statements, Consolidation, Lithium, Amendment, NLI