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Lithium One Announces Positive Preliminary Economic Assessment for the Sal De Vida Lithium and Potash Project, Argentina
Date : 10/05/2011 @ 8:00AM
Source : MarketWire Canada
Stock : Lithium One Inc. (LI)
Quote : 0.79 0.01 (1.28%) @ 11:16AM
Lithium One Announces Positive Preliminary Economic Assessment for the Sal De Vida Lithium and Potash Project, Argentina
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Lithium One Inc. (the "Company") (TSX VENTURE:LI), is pleased to announce
completion of a positive preliminary economic assessment ("PEA") for the Sal de
Vida lithium and potash project at Salar del Hombre Muerto, Argentina (the
"Project"). The PEA outlines an operation producing 25,000 tonnes pa lithium
carbonate and 107,000 tonnes pa potash, with a 28% internal rate of return
("IRR") and a US$1.066 billion net present value ("NPV") at an 8% discount rate.
The table below summarizes the key elements of the PEA:
Preliminary Economic Assessment Highlights (All currency is US$, pre-tax)
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Net Present Value ("NPV") @ 8% Discount rate $1.066 billion
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Internal Rate of Return ("IRR") 28%
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Total Estimated Capital Costs $356 million
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Estimated Operating Costs (per tonne of lithium
carbonate) F.O.B. Antofagasta, Chile - Port $1,537
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Estimated Operating Costs (per tonne of KCl)
F.O.B. Guemes, Argentina - Rail head $184
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Average Annual Cash Flow for Initial 20yrs Production $139 million
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Estimated Mine Life 40+ years
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Inferred Resource (Lithium carbonate equivalent "LCE") 5,440,000 tonnes
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Inferred Resource (Potash equivalent "KCl") 21,300,000 tonnes
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Annual Production Rate Lithium Carbonate 25,000 tonnes
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Annual Production Rate Potash 107,000 tonnes
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Projected commencement of revenue generation 2015
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Projected years to payback less than 4 years
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Lithium One CEO and Founding Director, Paul Matysek commented, "The Sal de Vida
lithium and potash operation outlined for this PEA is one of the highest value
and lowest net cost lithium development projects yet announced. The high NPV,
high net cash flows and very low unit cost for lithium carbonate production
result from a lithium and potash bearing brine with good supporting chemistry
occurring near surface with excellent conditions for evaporation. The
contribution from potash is very significant, as the annual revenue from potash
alone is projected to more than cover total operating expenses. Our results to
date and this engineering study make a compelling case for expediting the
development of the Sal de Vida Project."
Sensitivity Analysis
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Pre-Tax After-Tax IRR IRR
Discount Rate NPV Millions NPV Millions (Pre-tax) (After-tax)
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6% $1,532 $1,207 28.0% 24.6%
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8% $1,066 $811 28.0% 24.6%
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10% $758 $556 28.0% 24.6%
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The Project enjoys robust economics across a range of discount rates. The
operation outlined for this PEA would generate over US $200 million in annual
revenue, approximately 70% of which will be from lithium carbonate and 30% from
potash.
While inferred resources are not mining reserves and there is no assurance that
any portion of the inferred resources will be successfully upgraded to reserves,
the contained lithium carbonate and potash in the inferred resource would be
sufficient for a very long mine life. Assuming process recoveries of 60%, the
current Sal de Vida resource would yield a project life of more than 40 years.
The Company continues its drilling program to both expand the existing resource
and upgrade it to reserve status.
Patrick Highsmith, Lithium One's President and COO, elaborated on the
preliminary economics of the Project, "We are pleased with the level of
engineering expertise and rigor behind this PEA. Through the process we gained
considerable insight into opportunities for further improvement in the overall
economics, such as: in situ clay liners for the ponds, the higher grade brine
from the North Basin, and accelerated start-up of pumping. The major
contribution of our potash production means that this operation can clearly
weather any fluctuations in the lithium carbonate price as both demand and
supply increase, as expected, over the next decade."
Details and Assumptions
The PEA used commodity pricing from a study commissioned from Roskill
Information Services, which yielded average pricing per tonne of US $5,490 for
lithium carbonate and US $620 for potash for the 2011 - 2025 period, expressed
in 2011 dollars.
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Summary of Estimated Capital Costs (US$ Millions)
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Brine Extraction 15.7
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Evaporation Ponds 124.3
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Lithium Carbonate Plant 16.8
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KCl Plant 29.8
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Infrastructure, Services, Supplies 58.9
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Indirect Costs 51.0
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Sub Total 296.5
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Contingency (20%) 59.3
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Total Estimated Capital Costs 355.8
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The operation outlined by ARA Worley Parsons in this PEA at Sal de Vida will
consist of approximately 11 km2 of evaporation ponds, approximately 21
production wells plus 3 stand-by wells and plant facilities for the production
of lithium carbonate and potash. The evaporation and settling ponds represent
the biggest component of the estimated capital costs, as plastic linings are
assumed in the PEA for all the ponds. There is considerable natural clay
occurring near surface that may be suitable for in-situ lining of a portion of
the ponds, which could significantly reduce this cost. Soils engineering studies
are currently underway to establish to what extent plastic linings can be
replaced with natural clay.
The anticipated production rate from wells is analogous to the mining rate in a
conventional hard rock mine. So it is an important determinant of the lithium
and potash production levels. For the purposes of this study, the Company has
used a pumping rate of approximately 20 litres/second for the production wells.
The Company and its hydrogeological consultants believe this rate of production
or higher is easily achievable. Preliminary pumping tests have already yielded
pumping rates above 20 litres/second. The pumping tests are still being
completed, so this production rate remains a variable until the pumping tests
are completed and the NI 43-101 technical report has been updated accordingly.
The Company anticipates publishing pumping test results before the end of 2011.
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Summary of Estimated Operating
Costs
(from first full year of 000 US$ / Tonne 000 US$ / Tonne
production) Li2CO3 KCl
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Chemical Consumption 1,106 77
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Energy 93 12
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Maintenance 105 17
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Manpower 91 10
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Catering and Camp Services 27 3
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Salt removal 21 2
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Transport 60 59
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Total Direct Costs 1,503 180
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Indirect Costs 34 4
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Total Operating Costs 1,537 184
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Total Annual Operating Costs
000 US$ 57,811
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Among operational expenses, the Sal de Vida operation will be most sensitive to
the consumption of lime and soda ash, which are used to remove impurities from
the brine and precipitate lithium carbonate. The cost of lime and soda ash is
included in chemicals in the estimated operating costs table above. The
technical and engineering teams have identified and commenced discussions with
several Argentine sources for lime, whereas, at this stage, it is contemplated
that soda ash will be imported. Transport is another significant cost element.
Every effort is being made to optimize transport, both inbound and outbound;
however, the PEA assumes exclusively conventional truck transport.
Consistent with practice in the industry, this PEA has been prepared with an
engineering accuracy of 35%. As the project progresses through the feasibility
stage, advancement in basic and detailed engineering will improve the accuracy
to approximately 15%.
PEA Report
The PEA was prepared in accordance with the guidelines of National Instrument
43-101 by independent engineering firm ARA Worley Parsons S.A. ("ARA"). Worley
Parsons ("WP") is a leading full-service engineering firm; ARA is WP's affiliate
in Chile. ARA's experience in the sector includes the design and construction
supervision of many components of the world's largest and lowest cost
lithium-potash brine processing facilities in Chile. The final PEA technical
report will be filed on SEDAR within 45 days.
Proposed Operation
The proposed Sal de Vida lithium and potash brine operation outlined in the PEA
will make use of conventional evaporation processing, similar to that employed
at both the world's largest lithium brine operations at Salar de Atacama in
Chile and FMC's new potash circuit at the Fenix lithium project adjacent to Sal
de Vida. Much of the preliminary process design used in this PEA has been
confirmed by the Company's ongoing operations at its pilot plant and from
laboratory-scale test work at various facilities. The operation is expected to
take approximately 9 months from the commencement of evaporation for the first
production of lithium carbonate. The following is an outline of the Sal de Vida
process:
The process for the Sal de Vida Project, incorporated into the PEA, involves
brine being pumped from production wells to pre-treatment ponds where lime is
added to remove magnesium. Pumps will then convey the brine into a series of
segmented evaporation ponds, where the intense evaporative conditions of the
salar concentrate the lithium and potash and remove excess halite (common salt).
The final ponds further concentrate the brine to remove calcium, sulphate and
other trace constituents while crystallizing a potash-dominant solid. This solid
will be upgraded through a flotation process to produce muriate of potash on
site. The final brine, now enriched to a design specification of more than 2%
lithium, will be treated in the lithium carbonate plant to remove the remaining
boron and trace magnesium and calcium and produce the final lithium carbonate
product.
Summary of Sal de Vida Resource Estimate
This PEA has been prepared by ARA Worley Parsons, a fully independent
international engineering firm with extensive experience in lithium and potash
brine projects. The reader is cautioned that these estimates are preliminary in
nature and are based on a NI-43-101 compliant inferred mineral resource.
Inferred resources are considered too speculative geologically to enable them to
be categorized as mineral reserves and there is no certainty the results
predicted by the PEA will be realized.
As reported in the April 25, 2011 NI 43-101 technical report filed on SEDAR, the
Sal de Vida Project contains a resource estimate of 5,440,000 tonnes of lithium
carbonate equivalent and 21,300,000 tonnes of potash equivalent in the Inferred
category. This work was completed by independent qualified person Mr. Michael
Rosko of the international specialist hydrogeology firm E.L. Montgomery &
Associates (M&A).
Table 1. Sal de Vida Brine Inferred Resource Statement (500 mg/L cut-off)
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Brine Avg. In situ Li2CO3
Volume Li Li Equivalent
(m3) (mg/l) (tonnes) (tonnes)
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Phase I Resource 1,470,000,000 695 1,020,000 5,440,000
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Table 1. Sal de Vida Brine Inferred Resource Statement
(500 mg/L cut-off)
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Avg. In situ KCl
K K Equivalent
(mg/l) (tonnes) (tonnes)
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Phase I Resource 7,590 11,200,000 21,300,000
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Lithium One is currently completing a drill program that includes infill drill
holes to upgrade the resource estimate to the measured and indicated category
before the end of 2011. In addition, there remains significant potential to
increase the resource as drilling continues to encounter consistent, high-grade
brine outside of the existing resource area, such as that outlined in the newly
identified North Basin. (See August 31, 2011 news release.)
Feasibility Study
The Lithium One team continues to advance multiple aspects of the development
program at Sal de Vida, working towards completing a feasibility study by the
middle of 2012. The Company expects to complete pumping tests, a resource
upgrade and certain refinements to the process flowsheet before the end of the
year.
Permitting
Lithium One has completed an environmental and communities baseline study for
the Sal de Vida Project which did not identify any major environmental
liabilities or conflicts with local communities and stakeholders. This baseline
study will be a key component of the environmental impact study for the proposed
co-product lithium and potash project. The project team is working closely with
the authorities in the mining-friendly provinces of Catamarca and Salta to
complete the environmental impact study, which is the fundamental document in
the mine permitting process.
Off-take, Marketing and Debt Facility Agreements
Lithium One's partners, KORES, LG International and GS Caltex, (the Korea
Consortium, "KC") are funding the feasibility program up to US$15m to earn a 30%
project interest. As part of the joint venture agreement, the KC will have the
right and obligation to purchase 30% of the lithium products produced from Sal
de Vida at market prices, as well as a right of first offer to purchase an
additional 20%. The KC will have the right to market the lithium products in the
Chinese, Japanese and Korean markets, while Lithium One will have the right to
market the potash and any boron by-products worldwide. Furthermore, under the
agreement, the KC will provide a project completion guarantee and arrange the
debt component of the entire capital development costs.
Qualified Person
Roger Kelley is the independent qualified person contracted by ARA Worley
Parsons on this PEA who has reviewed and approved the technical contents of this
release. Mr. Kelley is a metallurgical engineer with more than 40 years
experience, a fellow of the South African Institute of Mining and Metallurgy
(SAIMM), and a qualified person as defined by NI 43-101.
About Lithium One:
Lithium One Inc. is well positioned to be a next-generation low cost producer of
lithium and potash. The Company has two major projects funded through
feasibility by earn-in partners: the Sal de Vida lithium and potash brine
project in Argentina and the James Bay bulk tonnage spodumene project in Quebec.
KC are earning a maximum 30% project equity in Sal de Vida by funding the
feasibility study expected in 2012, providing an off-take agreement for up to
50% of the lithium production and a completion guarantee for the debt component
of the capital development costs. Galaxy Resources is earning a maximum 70%
project equity in the James Bay Project through an earn-in agreement that
includes delivery of a feasibility study by early 2013. The Company's strategy
is to draw upon its quality team and employ best practice to develop its
projects into leading suppliers of low-cost, high quality lithium products to
the global market.
ON BEHALF OF THE BOARD OF DIRECTORS,
Paul Matysek, Chief Executive Officer
Cautionary Note
The PEA was prepared to broadly quantify the Sal de Vida 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 Preliminary Economic Assessment 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, and there is no certainty that the results predicted by the
Preliminary Economic Assessment will be realized. 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.
Forward-Looking Statements
This document may contain "forward-looking information" within the meaning of
Canadian securities legislation (hereinafter referred to as "forward-looking
statements"). All statements, other than statements of historical fact, included
herein including, without limitation statements relating to the Preliminary
Economic Assessment, estimated capital and operating costs, productions rates,
cash flows, rates of return, mine life or mineral resources, securing of debt
for future project construction, purchase of future mine production, the timing
for completion of an NI 43-101 resource and other matters related to the
exploration and development of the Project, are forward-looking statements.
These forward-looking statements are made as of the date of this document and
the Company does not intend, and does not assume any obligation, to update these
forward-looking statements. Forward-looking statements relate to future events
or future performance and reflect management's expectations or beliefs regarding
future events. By their very nature forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by the
forward-looking statements. Factors that could cause actual results to differ
materially from those in forward-looking statements include unsuccessful
exploration results, changes in metals prices, changes in the availability of
funding for mineral exploration, unanticipated changes in key management
personnel and general economic conditions, title disputes as well as those
factors detailed from time to time in the Company's interim and annual financial
statements and management's discussion and analysis of those statements, all of
which are filed and available for review on SEDAR at www.sedar.com.
In certain cases, forward-looking statements can be identified by the use of
words such as "plans", "expects" or "does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not
anticipate", or "believes", or variations of such words and phrases or
statements that certain actions, events or results "may", "could", "would",
"might" or "will be taken", "occur" or "be achieved" or the negative of these
terms or comparable terminology. Although the Company has attempted to identify
important factors that could cause actual actions, events or results to differ
materially from those described in forward-looking statements, there may be
other factors that cause actions, events or results not to be as anticipated,
estimated or intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly, readers
should not place undue reliance on forward looking statements.
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