Nemaska's Whabouchi study pegs pretax NPV at $3.3BNEMASKA LITHIUM RELEASES 2018 FEASIBILITY STUDY
Nemaska Lithium Inc. has released the results of its 2018 feasibility study on the Whabouchi mine and concentrator located in the Eeyou Istchee James Bay territory in Quebec, and on the hydromet plant located in Shawinigan, Que. A conference call on the 2018 feasibility study will be held on Tuesday, Jan. 9, 2018, at 11 a.m. Eastern Time. Conference call details are set out at the end of this press release.
"With more than a year of experience in building, commissioning and operating the Hydromet phase 1 plant in Shawinigan and the production of over 1,050 tonnes of above 6 per cent spodumene concentrate from a bulk sample at the Whabouchi mine, our confidence in the process at both the mine and Hydromet plant has increased and we believe our project is significantly derisked. As well, the updated resource block model following the 2016 and 2017 drilling campaign has allowed us to increase the Whabouchi mine life from 26 to 33 years," said Guy Bourassa, president and chief executive officer of Nemaska Lithium. "The 2018 feasibility study takes into consideration our operational experience and our current offtake contracts as well as ongoing discussions with potential customers and our assessment of the lithium market. Accordingly, we have increased the overall capacity of the commercial project by 20 per cent and added flexibility to the hydromet plant, increased the lithium carbonate production capacity up to 16,000 tonnes per year while maintaining the flexibility to produce up to 100 per cent of lithium hydroxide, as both products are in high demand, and the known lithium carbonate sales price is now very similar to that of lithium hydroxide."
The 2018 feasibility study shows a pretax net present value (8-per-cent discount) base case of $3.3-billion and a pretax internal rate of return of 34.4 per cent. There has been a considerable strengthening of the lithium salts market which has been reflected in the selling prices for lithium hydroxide and lithium carbonate. The 2018 feasibility study uses an average sales price of $14,000 (U.S.)/tonne for lithium hydroxide throughout the life of mine, while the average selling price for lithium carbonate is $9,500 (U.S.)/tonne for the first five years and $12,000 (U.S.)/t thereafter over the remaining life of mine.
On the opex (operating expenditures) side, with costs per tonne during the almost equal to 24-year open-pit mine life of $3,655 ($2,811 (U.S.)/t) for lithium hydroxide and of $4,424/t ($3,403 (U.S.)/t) for lithium carbonate, Nemaska Lithium remains a low-cost producer of both products and confirms its competitive position among global lithium salts producers.
The current capex (capital expenditures) for the mine, concentrator and hydromet plant is $801-million, excluding already invested capex of $74-million. This capex reflects the process optimization as well as the additional equipment required to increase production of lithium carbonate from 3,250 tonnes/year up to 16,000 tonnes/year, which is reflected in the increase in the total output capacity of the hydromet plant by 20 per cent, going from a capacity of 27,400 t/y LCE (lithium carbonate equivalent) to 33,000 t/y LCE. In addition, based on the operating experience gained at both the mine and the hydromet plant, the 2018 feasibility study includes, among other things, the addition of an ore sorting circuit at the mine. Additional equipment and buffer zones have also been added throughout the process at both sites to increase the operability, while enhancing process reliability as well as allowing continuing maintenance without disrupting operations, thus ensuring optimal performance.
Mr. Bourassa continued: "We have been actively engaged on project financing for several months and are now at the stage of confirmatory due diligence with numerous groups interested in participating in the financing of the project. Given the alternatives being evaluated, we are confident that the project financing will be completed during the current quarter."
"I am confident that, given the current stage of the project, the strong economics of this 2018 feasibility study will positively impact the ongoing financing discussions and help the corporation in completing the required project financing structure for the benefit of all stakeholders of the corporation," said Steve Nadeau, chief financial officer of Nemaska Lithium.
The 2018 feasibility study encompasses a combined open-pit and underground mine operation, concentration facilities, tailings and water management at mine site as well as a hydrometallurgical processing facility in Shawinigan. It was prepared by Met-Chem/DRA and Hatch Ltd. with contribution from SGS Geostat for resource evaluation, SNC-Lavalin for waste tailings codisposal and water management, Nardella for the project schedule, and from Dr. Michel L. Bilodeau, BEng, MSc (App), PhD, for the economic model. The mineral reserve in this 2018 feasibility study has an effective date of Nov. 7, 2017.
The 2018 feasibility study positively compares with the 2016 feasibility study on a number of fronts, as shown in the associated table.
2018 FEASIBILITY STUDY HIGHLIGHTS (all calculations assume a spodumene concentrate of 6.25 per cent Li2O) 2018 feasibility study 2016 updated feasibility study Expected mine life 33 years 26 years $19.2-billion ($14.8-billion (U.S.)) $9.2-billion ($7.4-billion (U.S.)) Life of mine revenue (average of $581-million/yr) (average of $354-million/yr) $13.2-billion ($10.2-billion (U.S.)) $6.2-billion ($4.9-billion (U.S.)) (average of $425-million/yr (average of $259-million/yr Pretax net undiscounted cash flow before initial capex) before initial capex) After-tax net undiscounted cash flow $9.6-billion ($7.4-billion (U.S.)) $3.9-billion ($3.1-billion (U.S.)) Pretax NPV 8-per-cent discount (base case) $3.3-billion ($2.5-billion (U.S.)) $1.9-billion ($1.5-billion (U.S.)) After-tax NPV 8-per-cent discount (base case) $2.4-billion ($1.8-billion (U.S.)) $1.2-billion ($900-million (U.S.)) Pretax internal rate of return (IRR) 34.4% 37.7% After-tax internal rate of return (IRR) 30.5% 30.3% $801-million ($616-million (U.S.)) $549-million ($439-million (U.S.)) Total initial capital costs in capex including contingency in capex including contingency After-tax pay back of capital costs* 2.9 years 2.7 years Average selling price lithium $14,000 (U.S.)/t ex $9,500 (U.S.)/t ex hydroxide over LOM works Shawinigan works Shawinigan Average selling price lithium $11,719 (U.S.)/t ex $7,000 (U.S.)/t ex carbonate over LOM works Shawinigan works Shawinigan Spodumene concentrate average $285/t ($219 (U.S.)/t) ex $174/t ($139 (U.S.)/t) production cost per tonne (open pit) works Whabouchi mine ex works Whabouchi mine Spodumene concentrate average $353/t ($272 (U.S.)/t) ex $221/t ($177 (U.S.)/t) Production cost per tonne (underground) works Whabouchi mine ex works Whabouchi mine Lithium hydroxide average production cost per tonne (from the open- $3,655/t ($2,811 (U.S.)/t) $2,645/t ($2,116 (U.S.)/t) pit concentrate) ex works Shawinigan ex works Shawinigan Lithium carbonate average production cost per tonne (from the open- $4,424/t ($3,403 (U.S.)/t) $3,382/t ($2,706 (U.S.)/t) pit concentrate) ex works Shawinigan ex works Shawinigan seven-million-tonne spodumene 5.5-million-tonne spodumene concentrate converted into almost concentrate converted into almost equal to 770k tonnes battery-grade equal to 714k tonnes battery-grade lithium hydroxide and almost equal to lithium hydroxide and almost equal 361k tonnes of battery-grade to 84k tonnes of battery-grade lithium carbonate lithium carbonate (average per year of almost equal (average per year of almost equal to to 213k tonnes of concentrate to 213k tonnes of concentrate to produce almost equal to 23k tonnes produce almost equal to 28k tonnes of lithium hydroxide and almost equal of lithium hydroxide and almost equal Life-of-mine production to 11k tonnes of lithium carbonate) to 3k tonnes of lithium carbonate) Exchange rate Canadian dollar to U.S. dollar 1:0.769 1:0.80 * After start of commercial production.
Mine and hydromet plant plan
The feasibility study outlines a combined open-pit and underground mine. The open-pit mine proven and probable reserves are 24 million tonnes at 1.53 per cent lithium oxide (Li2O). The underground mine proven and probable reserves are 13 million tonnes at 1.16 per cent Li2O. The combined open-pit and underground proven and probable reserves are 37 million tonnes at 1.40 per cent Li2O.
During the first 23.6 years, production will be derived from an open-pit developed to a maximum depth of 224 metres and with an average strip ratio of 2.95 to 1. The open pit will be mined using a standard fleet of offroad mining trucks and hydraulic excavators at a rate of 2,830 tonnes of ore per day.
During the last 9.4 years, the ore production will be derived from an underground operation at 3,665 tonnes per day and accessed via a ramp within the open pit. The underground development will reach an average depth of 55 metres below the pit bottom. The selected underground mining method is long-hole stoping with the crown pillar below the pit recovered at the end of the mine life.
Nemaska Lithium has received the general certificate of authorization (CA) for the Whabouchi mine project from the Quebec Ministry of Sustainable Development, Environment and the Fight Against Climate Change on Sept. 8, 2015, and was granted a positive federal decision on July 29, 2015, and therefore has now obtained all basic environmental authorizations enabling it to move forward with its Whabouchi mine project. In addition, the Quebec Ministry of Energy and Natural Resources (MERN) has issued a mining lease for the Whabouchi lithium project in compliance with Section 100 of the Mining Act. This lease comprises the mining and surface rights necessary to exploit the Whabouchi deposit, and is valid for an initial period of 20 years (expiring Oct. 25, 2037). The lease can thereafter be renewed every 10 years for the duration of the mining operation. Also, Nemaska Lithium has obtained the required leases for the occupation of the domain of the state as per Section 239 of the Mining Act, allowing the use of lands for tailings disposal, concentrator and ancillary installations, and other facilities necessary for mining activities. Nemaska Lithium has also made its initial payment for 50 per cent of the reclamation plan approved by the MERN in the amount of $4,603,239.
At the mine site, the construction of the commercial concentrator building and administrative offices is complete, most of the site preparation is done while the 13-kilometre 69-kilovolt power line is currently under construction and should be connected to the grid in March, 2018.
WHABOUCHI FEASIBILITY STUDY RESULTS AND KEY ASSUMPTIONS Mining parameters (OP + UG) tonnes processed (Mt) 37 waste rock and overburden (Mt) 72 diluted grade (% Li2O) 1.40 mine life (LOM) (years) 33 Mining cost parameters preproduction capex ($M) $7 hydroelectricity price ($/kWh) $0.053 (H-Q, tariff L) LOM opex open pit ($/t concentrate) $98 LOM opex underground ($/t concentrate) $167 Concentrator cost parameters capex ($M) (including closure costs payment) $263 opex concentrator ($/t concentrate) $95 opex tailings and water management ($/t concentrate) $13 G&A opex ($/t concentrate) $72 opex transport cost ($/t concentrate) $50 Hydromet plant cost parameters capex ($M) $531 opex ($/t lithium product) hydromet plant only $1,817 opex ($/t lithium product) all inclusive $4,012 Overall sustaining capital LOM sustaining capex ($M) $604 Revenue parameters (real terms) gross revenue ($M over LOM) concentrate $264 lithium hydroxide (LiOH-H2O) $13,283 lithium carbonate (Li2CO3) $5,504 lithium hydroxide (LiOH-H2O) toll services $129 cash operating margin $14,640 Lithium compounds parameters product (U.S. $ over LOM average selling price/t) lithium hydroxide (LiOH-H2O) $14,000 (U.S.) lithium carbonate (Li2CO3) $11,719 (U.S.) exchange rate $1:0.769 U.S. cents Schedule parameters date for NPV calculation Jan. 1, 2018 construction mobilization Q3 2016 concentrator commissioning starts Q2 2019 (est.) commercial production declared Q4 2019 (est.) hydromet commissioning starts Q1 2020 (est.) commercial production declared Q4 2020 (est.) Valuation parameters pretax NPV 8% ($B) $3.3 pretax IRR 34.4% after-tax NPV 8% ($B) $2.4 after-tax IRR 30.5%