LSC Lithium Corporation (“
LSC” or together with
its subsidiaries, the “
Company”) (TSXV:LSC) is
pleased to announce that it has completed the Preliminary Economic
Assessment (“
PEA”) for its Pozuelos-Pastos Grandes
(“
PPG”) Project.
PEA HIGHLIGHTS
US$2,994/t Li2CO3 |
US$338m |
US$1,036m |
34 |
% |
Avg Operating Costs (incl. 5% contingency) |
Initial Capital (incl. $59m contingency) |
NPV8% (Pre-tax) |
IRR (Pre-tax) |
US$125m |
20,000tpa |
US$762m |
30 |
% |
After Tax Annual Free Cash Flow |
Production of Battery Grade Li2CO3 |
NPV8% (Post-tax) |
IRR (Post-tax) |
- US$762 million after-tax
NPV at 8% discount rate and IRR of 30%
- CAPEX estimate of US$338
million with 34% of estimate at PFS level accuracy
- OPEX of US$2,994/t of
lithium carbonate over life of mine
- Mine life of at least 20
years with initial production in 2021 and steady state in
2024
- Designed for production of
20,000tpa of battery grade lithium carbonate
- Combined PPG Project
Resource of 2,617,000 tonnes LCE in Measured and Indicated category
and 938,500 tonnes LCE in the Inferred categoryi
- Process development
supported by benchscale test work. Pozuelos brine chemistry, in
particular is amenable to excellent process
performance
LSC’s President and CEO, Ian Stalker, noted,
“These results support our view that PPG is one of the most
advanced and economically viable lithium projects in Argentina.
Operating costs are in the lowest quartile globally, the capital
requirements are manageable, and we are excited by the large
resource, which leaves room for future upsizing.
"This important development milestone will be
further supported by the Environmental Impact Statement which we
intend to submit to the Salta mining secretary before the end of
the year. We look forward to 2019, when further pilot testing and
geotechnical work at the project will support further data for a
full Feasibility Study.”
The PEA is based upon brine grades across LSC’s
Measured, Indicated and Inferred Mineral Resources only. Mineral
Resources that are not mineral reserves do not have demonstrated
economic viability. There is no certainty that the PPG Project
envisioned by the PEA will be realized. The PEA is preliminary in
nature and includes Inferred Mineral Resources that are considered
too speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as mineral
reserves.
Unique Project Advantages
The PPG Project enjoys certain unique
advantages, which support a rapid development schedule, and low
capital and operating costs:
- LSC controls over 90% of the area
of the Pozuelos salar and its surroundings. This advantageous
position makes siting of infrastructure, extraction of fresh water
and preparation of brine-extraction models extremely simple. In
this way, sustainable pumping of brine can be ensured.
- Geotechnical conditions in the
mature portion of the Pozuelos salar are such that construction of
evaporation ponds can occur on the salar surface at low cost.
- For the two reasons above, it was
decided to locate all infrastructure at Pozuelos, with only
extraction wells and a pipeline located at Pastos Grandes.
- Pozuelos’ proximity to the existing
Fenix gas pipeline ensures that only a 26km connection needs to be
constructed. LSC has been allocated gas capacity on this pipeline
by the gas supply company.
- At least three separate sources of
fresh water have been identified and road access is readily
available.
- The brine chemistry of the Pozuelos
and Pastos Grandes salars complement each other. Test work has
shown that an efficient evaporation path can be pursued to produce
a high grade and high purity concentrate for feeding into the
lithium plant ensuring high recovery rates.
- The Argentine fiscal regime is
supportive of mining projects. A reduced corporate tax rate of 25%
will be effective for the industry from 2020. A royalty of 3% is
applied to all exported products. Salta Province in particular, is
actively encouraging mining investment and therefore requires no
additional royalties or government participation in the project at
this time.
- Pozuelos hosts no communities in
the immediate vicinity or environmentally sensitive flora or fauna.
This increases the likelihood of a fast and efficient project
approval and implementation.
- LSC developed a processing method
that is based on conventional and proven operations for lithium
brines.
GHD was selected in June 2018 as the preferred
engineering company for the execution of the PEA after an extensive
selection process, where LSC solicited expressions of interests and
proposals from 14 different companies across the globe. GHD offers
extensive experience in the design and implementation of lithium
projects with brine feedstock. GHD has experience in Argentina’s
Puna plateau, working with Orocobre as the preferred engineering
service provider for the expansion project at Sales de Jujuy
operation, as well as providing services for Neo Lithium’s Tres
Quebradas project. GHD also supports major lithium producers in
Chile and Australia along with other lithium developers in the
South American region.
1. Capital
Costs
Capital costs were estimated by GHD based on
initial civil material take-offs, a detailed mechanical equipment
list and budget offers for major equipment. The accuracy of the
capital cost estimate is +/- 25%. A summary is shown in Table 1.
LSC made the decision to develop the primary concentration ponds to
a higher level of accuracy. Additional engineering was undertaken
to support an estimate for this infrastructure that is at
Pre-feasibility Study (“PFS”) level.
Table 1 - Capital Cost
Summary
Description |
US$ '000's |
Production Wells and Primary Ponds* |
88,862 |
Secondary and Tertiary Ponds and Chemical Treatment |
48,806 |
Lithium Carbonate Plant |
33,194 |
Reagents and Services |
23,808 |
Infrastructure |
42,888 |
Direct Capex |
237,558 |
Indirect Costs |
41,418 |
Contingency |
58,672 |
Total Capex |
337,648 |
*Engineering and Cost Estimate at PFS Level |
Brine supply from Pastos Grandes, as well as
ponds and equipment for salt harvesting, have been deferred to
Years 2 and 3 of operations respectively. This equates to a
deferred capital cost of $33m (or 10% of initial capex), which will
be funded from operating cash flows during project ramp up.
2.
Operating Costs
Operating costs were estimated by GHD based on
information provided and subject to several assumptions, and are
shown in Table 2. The accuracy for the operating cost estimate is
+/- 25%. The operating costs benefit from major fundamental
advantages, which include:
- High expected process recoveries
based on an understanding of the chemical evolution. This has been
reviewed and confirmed by process test work undertaken by LSC.
- A high quality brine feedstock from
Pozuelos salar, which is complemented by Pastos Grandes
chemistry.
- Optimisation within the lithium
plant through the use of Continuous Ion Exchange circuits.
Table 2 - Summary of Operating
Costs
Description |
US$ / t Li2CO3 |
Reagents |
1,431 |
Salt Removal and Transport |
440 |
Energy |
160 |
Manpower |
314 |
Catering & Camp Services |
106 |
Maintenance |
144 |
Consumables |
25 |
Product Transport to Antofagasta Port |
115 |
Direct Costs Subtotal |
2,735 |
|
|
Contingency (5%) |
137 |
General & Administration |
122 |
Indirect Costs |
259 |
|
|
Total OPEX |
2,994 |
Sustaining capital was estimated by GHD to
average approximately $373/t and at current prices, royalties are
approximately $360/t lithium carbonate. Total all-in sustaining
costs are therefore expected to be $3727/t. This places the PPG
Project at the bottom end of the current production cost curve for
lithium carbonate. See the following link for the current
production cost.
3. Price
Assumptions and Economic Analysis
3.1 Price Assumptions
The PPG Project has been designed to produce
20,000 tons per annum of lithium carbonate that meets “battery
grade” specifications.
LSC has reviewed five publicly available price
forecast scenarios, which have been concluded between May 2017 and
August 2018 as part of technical studies for other lithium
projects. The forecasts include analysis undertaken by signumBOX,
Roskill, Global Lithium LLC and Benchmark Mineral Intelligence.
It was found that long-term price forecasts used
in other projects vary between $11,800-$14,500/t lithium carbonate,
with an average forecast price of approximately $13,500/t. This
compares with the current free on board (fob) price achieved by an
Argentinian lithium producer of $14,700/t (Orocobre, Nov 2018).
LSC applied a conservative long-term price
forecast near the bottom end of the range of price forecasts used
by other project developers. A price of $12,000/t will be used for
the project base case. A downside scenario of $10,000/t and an
upside scenario of $15,000/t were also considered.
Table 3 - Battery Grade Lithium Carbonate
Price used for the PPG Project Economic Evaluation
US$/t Li2CO3 |
2018 (US$) |
2019(US$) |
Long Term (US$) |
Base |
12,000 |
12,000 |
12,000 |
High |
15,000 |
15,000 |
15,000 |
Low |
10,000 |
10,000 |
10,000 |
3.2 Economic Analysis
A Technical Economic Model was prepared by GHD
for the PPG Project. The model determined before and after tax
project economics in real terms.
A tax rate of 25% and a royalty of 3% was
applied to the gross market value of the product.
Using base case price assumptions, and applying
a discount rate of 8%, the after-tax project NPV is $762m, with an
IRR of 30%. Annual free cash flows are expected to be approximately
$125m.
The pre-tax NPV is $1,036m, with an IRR of 34%
and annual free cash flows of approximately $165m.
3.3 Sensitivity Analysis
Sensitivity analyses were undertaken for product
price, capex, production rate and discount rate. These
sensitivities on after-tax economics can be seen graphically at
this link.
The project economics are most sensitive to
product price. The after-tax NPV8% for the low product price
scenario is $515m and $1,135m in the high price scenario.
The net present value is least sensitive to
capex, with a 20% increase in capex, reducing the NPV8% by less
than $70m or less than 10%. The after-tax NPV10% is US$604m; the
NPV12% is $478m and the NPV6% is $962m. Reducing production to
16,000 tons per annum, reduces the NPV8% to $540m.
4. Mineral
Resource Estimate
A combined PPG Project resource estimate is
shown in Table 4. Combined Measured and Indicated Resources are
2.6Mt LCE, 1.7Mt from Pozuelos and 0.9Mt from Pastos Grandes. Total
PPG Inferred Resources are 0.9Mt LCE, 0.6Mt from Pozuelos and 0.3Mt
from Pastos Grandes.
Table 4 - Combined PPG Project Resource
Estimate
Resource Classification |
Total Brine Volume |
Li |
Ca |
Mg |
K |
SO4 |
RBRC |
Available Brine4 |
Li (tons) |
LCE Equivalent3 |
|
million m3 |
mg/l |
mg/l |
mg/l |
mg/l |
mg/l |
% |
Million m3 |
Metric tonnes |
Metric tonnes |
PASTOS GRANDES1 |
Measured |
7,353 |
465 |
682 |
3,093 |
4,783 |
9,847 |
4.83 |
355 |
168,090 |
894,720 |
Indicated |
508 |
452 |
727 |
2,909 |
4,479 |
9,533 |
3.51 |
18 |
8,335 |
44,360 |
M&I |
7,862 |
464 |
685 |
3,081 |
4,763 |
9,827 |
4.74 |
373 |
176,425 |
939,080 |
Inferred |
2,515 |
467 |
681 |
3,084 |
4,775 |
9,879 |
4.81 |
121 |
57,760 |
307,500 |
|
POZUELOS2 |
Measured |
4,713 |
470 |
1,757 |
2,652 |
4,143 |
6,570 |
8.41 |
396.4 |
180,000 |
958,000 |
Indicated |
4,260 |
544 |
1,054 |
3,216 |
2,761 |
11,359 |
5.84 |
248.9 |
135,155 |
719,500 |
M&I |
8,973 |
505 |
1,423 |
2,920 |
3,487 |
8,843 |
7.19 |
645.3 |
315,155 |
1,678,000 |
Inferred |
4,937 |
518 |
1,170 |
2,948 |
2,240 |
8,771 |
4.64 |
229.3 |
118,603 |
631,000 |
- For resource estimate details see
“Technical Report on the Pastos Grandes Lithium Project” dated
October 25, 2018 with an effective date of October 19, 2018
prepared for LSC as filed on SEDAR.
- For resource estimate details see
LSC press release dated November 27, 2018 “LSC Announces an Updated
Mineral Resource Estimate for the Pozuelos Project” as filed on
SEDAR. The effective date of the resource estimate for salar de
Pozuelos is November 22, 2018. A technical report on the updated
resource estimate for salar de Pozuelos will be issued within 45
days of the November 27, 2018 press release.
- Lithium Carbonate Equivalent (LCE)
calculated by applying a factor of 5.323 to lithium metal resource
estimate. Totals for M&I and Inferred Resources have been
rounded.
- Available brine volume within each
resource category calculated by applying the Relative Brine Release
Capacity (RBRC) factor to total brine volume. RBRC value is the
weighted average for the resource classification category.
- Resources have been classified in
accordance with CIM mineral resource definitions, May 25, 2014.
Assay values have been rounded to nearest whole number.
- Resources have been estimated by
Louis Fourie, P. Geo., Pr.Nat. Sci., under the direction of D.
Hains, P. Geo.
- Resources have been estimated using
a cut-off grade of 330 mg/L lithium for Pozuelos and 100 mg/L
lithium for Pastos Grandes based on economic considerations related
to estimated production costs for brine extraction.
- Mineral resources which are not
Mineral Reserves do not have demonstrated economic value. There is
no assurance that additional exploration will result in the
conversion of Mineral Resources to Mineral Reserves.
- Inferred Mineral Resources are
considered as too speculative to have economic criteria applied to
them. There is no assurance that additional exploration will result
in the conversion of Inferred Mineral Resources to Indicated or
Measured Mineral Resources.
5. Process
Development
The process development was undertaken in-house
by LSC and includes applications from mineral processing
technologies used in other commodities. This LSC process was
reviewed by GHD prior to incorporation into the PEA. The salt
chemistry in the evaporation stages of the process has been tested
in small basins in the Puna. Batch ion exchange and carbonation
have been tested at SGS in Perth, Australia.
This link shows images of the test work
undertaken both of the front end concentration process in Argentina
Puna conditions and the ion exchange test work undertaken at a
laboratory in Perth, Australia.
6.
Infrastructure
Other than brine extraction wells and the
pipeline connecting the two salars, no infrastructure is planned at
Pastos Grandes, with all project infrastructure to be located at
Pozuelos. This link shows a general arrangement drawing of the
project infrastructure.
Key project infrastructure components
include:
- Brine Extraction wells located at
Pastos Grandes and Pozuelos. Initially, a total of 15 pumping sites
are estimated to feed into the primary evaporation ponds.
- 770ha of primary evaporation ponds
supported by 40ha of auxiliary and washate ponds.
- 110ha of secondary and tertiary
ponds and associated equipment for chemical reagent addition,
entrainment recovery and other mechanical treatment.
- A lithium plant, including boron,
magnesium and calcium removal, carbonation circuit, micronisation,
bagging and product storage.
- An employee camp, offices and
warehouse, partially leveraging off the existing camp at
Pozuelos.
- A power generation plant,
consisting of 7 x 1.5MW gas engines and cogeneration facilities for
steam.
- A 26km long 4” (100mm) gas pipeline
tying into the Fenix gas pipeline to the west of the salar.
- Salt storage stockpiles both on and
off the salar for salt harvested from the primary and later ponds
respectively.
7.
Implementation Schedule and Next
Steps
GHD and LSC jointly developed an implementation
schedule which is shown in the attached link. First lithium
carbonate production is expected in 2021, with steady state
achieved in 2024.
LSC intends to start field work in the new year,
with construction of pilot plants and geotechnical testing at
Pozuelos. The Feasibility Study is currently scheduled to start in
Q2 2019.
Qualified Person
This press release is based upon information
prepared and approved by Donald H. Hains, P.Geo. Mr. Hains is a
qualified person, as defined in NI 43-101 and is independent of
LSC. Mr. Hains has verified all sampling, analytical and test data
underlying the information contained in this press release by
on-site inspection during drilling, brine sampling; review of drill
core photographs to verify lithology; review of certified assay
certificates against the assay data base and review of pump test
data. There are no drilling, sampling, recovery or other factors
that could materially affect the accuracy and reliability of the
data.
An NI 43-101 report is required to be filed, in
conjunction with the disclosure of this PEA and the Pozuelos
Resource Update, within 45 days of this press release.
The information contained in this news release
relating to the PEA has been reviewed and is approved by Lawrence
D. Henchel, P.Geo., of Stantec C International LLC. Mr. Henchel is
a “Qualified Person” as the term is defined in NI 43-101 and is
independent of LSC. GHD of Santiago, Chile, has also reviewed and
approved the presentation of the PEA information in this news
release.
ABOUT GHD:
GHD is one of the world’s leading professional
services companies operating in the global markets of energy and
resources, water, environment, property and buildings, and
transportation. Established over ninety years ago and privately
owned by its employees, GHD delivers engineering, architecture,
environmental and construction services to public and private
sector clients across five continents and the Pacific region.
Committed to creating lasting community benefit, GHD connects the
knowledge, skill and experience of nearly 10,000 diverse people
with innovative practices, technical capabilities and robust
systems. www.ghd.com
ABOUT LSC LITHIUM
CORPORATION:
LSC Lithium has amassed a large portfolio of
prospective lithium rich salars and is focused on
developing its material projects: Pozuelos and Pastos Grandes
Project, Rio Grande Project and Salinas Grandes Project. All LSC
tenements are located in the “Lithium Triangle,” an area at the
intersection of Argentina, Bolivia and Chile where the
world’s most abundant lithium brine deposits are found. LSC Lithium
has a land package portfolio totaling approximately 300,000
hectares, which represents extensive lithium
prospective salar holdings in Argentina.
For further information please
contact:
LSC Lithium Corporation Ian StalkerPresident
& Chief Executive Officer40 University Avenue, Suite 605,
TorontoON Canada M5J 1T1+416 306 8380Email:
info@lsclithium.comWeb: lsclithium.com
Forward-Looking Statements
Certain statements contained in this news
release constitute forward-looking information. These statements
relate to future events or future performance, including statements
as to the realization of the project advantages set out herein,
including access to infrastructure; ongoing government support;
ability and feasibility of building a pipeline; ability, timing and
likelihood of construction at PPG; accuracy of estimation of
capital and operating costs; timing of commencing a feasibility
study and field work; ability and likelihood of using combined
resource of PPG in the operation outlined in the PEA; likelihood of
upsizing the project; timing for submitting the EIS; the ability to
convert mineral resources to mineral reserves to be used in
operations; timing of production and likelihood of producing in
2021; likelihood of meeting target production rate at PPG; ability
and timing of advancing LSC’s properties through various stages of
exploration and resource development, and any other matters
relating to the exploration, production and development of PPG and
LSC’s other properties. The use of any of the words “could”,
“anticipate”, “intend”, “expect”, “believe”, “will”, “projected”,
“estimated” and similar expressions and statements relating to
matters that are not historical facts are intended to identify
forward-looking information and are based on LSC's current belief
or assumptions as to the outcome and timing of such future events.
Whether actual results and developments will conform with LSC's
expectations is subject to a number of risks and uncertainties
including factors underlying management's assumptions, such as
risks related to: drill program results; title, permitting and
regulatory risks; exploration and the establishment of any
resources or reserves on LSC properties; volatility in lithium
prices and the market for lithium; exchange rate fluctuations;
volatility in LSC’s share price; the requirement for significant
additional funds for development that may not be available; changes
in national and local government legislation, including permitting
and licensing regimes and taxation policies and the enforcement
thereof; regulatory, political or economic developments in
Argentina or elsewhere; litigation; title, permit or license
disputes related to interests on any of the properties in which the
Company holds an interest; excessive cost escalation as well as
development, permitting, infrastructure, operating or technical
difficulties on any of the Company's properties; risks and hazards
associated with the business of development and mining on any of
the Company's properties. Actual future results may differ
materially. The forward-looking information contained in this
release is made as of the date hereof and LSC is not obligated to
update or revise any forward-looking information, whether as a
result of new information, future events or otherwise, except as
required by applicable securities laws. Because of the risks,
uncertainties and assumptions contained herein, investors should
not place undue reliance on forward-looking information. The
foregoing statements expressly qualify any forward-looking
information contained herein. For more information, see the
Company's filing statement on SEDAR at www.sedar.com.
The PEA was prepared to broadly quantify the PPG
Project's capital and operating cost parameters and to provide
guidance on the type and scale of future project engineering and
development work that will be needed to ultimately define the
project's likelihood of a positive feasibility determination and
optimal production rate. It was not prepared to be used as a
valuation of the project nor should it be considered to be a final
feasibility study on which a commercial production decision could
be made as mineral resources that are not mineral reserves do not
have demonstrated economic viability. The capital and operating
cost estimates which were used have been developed only to an
approximate order of magnitude based on generally understood
capital cost to production level relationships, and although they
are based on engineering studies, these are preliminary so the
ultimate costs may vary widely from the amounts set out in the PEA.
This could materially adversely impact the projected economics of
the project. As is normal at this stage of a project, data in some
areas was incomplete and estimates were developed based solely on
the expertise of the Company's employees and consultants. At this
level of engineering, the criteria, methods and estimates are
preliminary and result in a high level of subjective judgment being
employed. There can be no assurance that the potential results
contained in the PEA will be realized.
Neither the TSX Venture Exchange Inc. nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
The TSX Venture Exchange Inc. has neither
approved nor disapproved the contents of this press release.
_________________________
i This Measured and Indicated figure is
comprised of 1,678,000 tonnes LCE from Pozuelos with average grade
of 505mg/l Li and 939,080 tonnes LCE from Pastos Grandes with
average grade of 464mg/l Li. This Inferred figure is comprised of
631,000 tonnes LCE from Pozuelos with average grade of 518 mg/l Li
and 307,500 tonnes LCE from Pastos Grandes with average grade of
467mg/l Li. See Technical Report titled “Mineral Resource Estimate
and Technical Report on the Salar de Pastos Grandes Project, Salta
Province, Argentina” with an effective date of October 28, 2018
filed on the Company’s SEDAR profile. See also the press release of
LSC dated November 27, 2018 filed on the Company’s SEDAR profile
for the updated resource estimate of Pozuelos. Numbers have been
rounded and may not add.
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