Bailouts of Private Mining and Metallurgical Ventures

Other examples of bailouts by governments and handouts to rich private interests are the case in point of lithium, another critical mineral, and industrial diamonds. During July 2019, the world commodity market price for lithium carbonate came to a low value of less than $10/kg because of "an ongoing avalanche of lithium supply, coming mostly from Australia." This forced many start-up mining projects to go belly up, as was the case for Nemaska Lithium which owned a spodumene mine bearing lithium in the James Bay area of northern Quebec and a processing plant to produce high grade lithium concentrate in Shawinigan, Quebec.

After putting $80 million of public funds in the Nemaska Lithium private mining and metallurgical venture in May 2018, the Quebec government again came to the rescue of the company, which filed for bankruptcy in December 2019. On August 20, Minister of Economy and Innovation Pierre Fitzgibbon announced that the Quebec government was buying back Nemaska Lithium along with two other private firms: Orion Mine Finance Group, Nemaska's biggest secured creditor, and Pallinghurst, a UK-based mining and metals private equity firm. The Quebec government will pay a huge portion of the $146.5 million in liabilities owned in part by Orion. Many small investors who had put their life savings into this venture lost everything. The Quebec government will also put in another $200-300 million of public funds in order to keep Pallinghurst as a "partner" in the rescue package.

To justify these huge handouts, Minister Fitzgibbon said in a statement: "The Nemaska Lithium project is a strategic project for Quebec and could contribute to economic recovery," adding that the development of batteries for electric vehicles is at the heart of the government's priorities. "It is essential to establish as many links as possible in the value chain, ranging from the extraction of minerals to the manufacture of batteries, so that Quebec can reap the maximum benefits."

This is the same Orion Mine Finance that partnered with Blackstone in 2015 to acquire part of Stornoway's Renard diamond mine in the James Bay area of Quebec that filed for bankruptcy in November 2019, at a time when the world market price for industrial diamonds plunged to new lows. This came after the former Marois PQ government and the former Couillard Liberal government authorized the spending of $300 million of public money to build the 143 km access road to the mine and used $122 million of public money to buy 26 per cent of the shares of Stornoway, making it the biggest single investor in the Renard mine project.

(With files from Government of  Quebec; Globe and Mail;

This article was published in

Volume 50 Number 40 - October 24, 2020

Article Link:
Bailouts of Private Mining and Metallurgical Ventures


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