Lake Resources refreshes Kachi Lithium Brine Project PFS with NPV now US$1.58 billion and potential production increase under review

Lake Resources NL (ASX:LKE) (OTCMKTS:LLKKF) has refreshed the pre-feasibility study (PFS) for its flagship Kachi Lithium Brine Project based on revised lithium price estimates, which demonstrates a more robust financial outcome than the original conservative PFS price assumptions.

Kachi’s project value, as post-tax net present value (NPV), increases 110% to US$1.58 billion (A$2.1 billion), with a 35% internal rate of return (IRR) and annual EBITDA of US$260 million (A$350 million), using updated lithium price forecast of US$15,500/tonne for battery-grade lithium carbonate. 

The clean lithium developer is also assessing the potential increase of lithium carbonate production at the Kachi Project, as demand continues to rise from battery makers for high purity product.

Project financially robust

Lake Resources’ managing director Steve Promnitz said: “Updated lithium prices demonstrate just how financially robust the Kachi project is, which could potentially be enhanced with a production expansion.

“Significant new production is required to meet the forecast growth in demand from EVs and energy storage over the next 10 years.

“The Kachi project remains highly scalable and the company is working towards an expansion, which would make it globally significant in terms of high purity lithium carbonate production, and well-positioned to supply the expected deficit in battery-grade product over the next few years.

“This is an important differentiator of Lake as it continues to engage with major participants in the battery materials supply chain and electric vehicle makers.

“These participants are seeking high purity product, that can be scaled up to meet demand and has a measurable ESG benefit. Lake ticks all those boxes.”

Shares have been as much as 10% higher in early trade to A$0.385 while LKE’s market cap is approximately A$355.1 million.

Financing

Joint financial advisors have been appointed to structure and arrange project finance, with a focus on export credit agencies (ECA), for the development of the Kachi Project.

SD Capital Advisory Ltd and GKB Ventures Ltd have been appointed and focus on securing project finance for resources companies in developed and frontier market with a track record of delivering access to government-supported schemes, including ECA financing.

Once project debt finance has been applied, free cash flow is anticipated to improve.

Confirmation of project debt support from export credit agencies on an approximate 70/30 debt-to-equity basis is anticipated to provide comfort for equity investment required.

Prospective off-takers

Discussions have been underway for some time with participants in the battery materials supply chain, including prospective off-takers, commodity traders, battery makers and electric vehicle companies, which should lead to adequate offtake arrangements prior to the completion of project finance.

Support for the project has increased since product quality was confirmed and then later proven in a battery half cell.

Production schedule

Production is planned to be ramped-up within the first six months to 25,500 tonnes per annum (tpa) of battery-grade lithium carbonate and then production to remain constant for 25 years.

The plant design in the PFS targeted production of 25,500 tpa of battery-grade lithium carbonate through the treatment of brine with direct lithium extraction technology based on ion exchange (IX).

The flowsheet comprises two sections:

• Direct lithium extraction as per Lilac Solutions Inc, uses ion exchange to produce a lithium-enriched eluate; and
• Lithium carbonate plant converts the eluate into refined lithium carbonate.

Test work

Test work conducted by Lilac and Hazen Research has demonstrated that a 99.97% lithium carbonate product with low impurities (battery grade) can be produced by the Lilac process within several hours of extraction

Operating costs can be reduced by replacing most of the gas supply with a solar PV (+/- wind power) supported by battery storage.

An expanded plant design would be planned to increase production of battery-grade lithium products as either lithium carbonate or potentially both lithium hydroxide and lithium carbonate.

Next steps

The DFS is underway with Hatch and other participants using the parameters from the PFS as a base targeting 25,500 tpa lithium carbonate.

Further engineering studies on reducing operating and capital costs for the project are expected to indicate that the operating cost can be reduced by replacing most of the gas supply with a solar PV (+/- wind power), supported by battery storage.

Consideration is being given to outsourcing solar hybrid power supply, with a guaranteed supply agreement over time.

An expansion would be assessed to commence after full capacity has been achieved from the initial 25,500tpa lithium carbonate equivalent (LCE) production.

Additional drilling will be undertaken to support the expansion case to allow for the conversion of part of the inferred resource into the measured and indicated mineral resource category.

This is expected to take place at the DFS stage, during the resource to reserve conversion process.

Further studies will be conducted on the feasibility of producing lithium hydroxide on-site.

The initial studies will be conducted internally with detailed financial studies undertaken by independent third party assessors.

Story by ProactiveInvestors