Source: Lithium project to earn Zim $3bn | The Herald November 22, 2018
Golden Sibanda and Tawanda Musarurwa
Australia Stock Exchange (ASX) listed Prospect Resources Plc says its Arcadia Lithium project, located 38 kilometres east of Harare, has proven capacity to generate nearly $3 billion in export revenue, according to the definitive feasibility study (DFS).
Prospect’s Arcadia electric vehicles batteries lithium has multipurpose potential including placement in the chemicals and ceramics global markets.
The project is expected to go into production in 2020.
Lithium has gained global significance due to its expanding use in electric vehicle batteries and lithium demand has also grown as industrialised nations lead the charge towards reduced carbon emissions while use of lithium-ion batteries for home electronics and medicinal drugs has also expanded.
Electric vehicles are about to reach tipping point in penetration and investment in battery technology and production is rising rapidly. China’s 2025 target is that over 20 percent of vehicle production in Asia’s largest economy will be EVs. Britain has a 2040 deadline for all vehicle sales to be EVs and zero emissions from all cars by 2050.
DFS, such as Prospect’s, are the most detailed studies on technical feasibility/specifications and commercial viability and determine definitively whether to proceed with the project. A detailed feasibility study will be the basis for capital appropriation, and will provide the budget figures for the project.
Detailed feasibility studies require a significant amount of formal engineering work, are accurate to within 10-15 percent and can cost between 0,5 percent-1,5 percent of the total estimated project cost Arcadia Lithium project’s DFS shows it has the potential to become the largest lithium project on the continent.
The company expects to rack in nearly $3 billion in exports earnings over course of the mine’s life from an investment of $165 million and also achieve payback in period of 2,5 years. Based on the proposed 2,4 million tonnes per annum mining and processing operation, the DFS indicates that Arcadia will be a strong financial, high margin project with current forecast Life Of Mine (LOM) revenue of US$2,93 billion and average annual EBITDA of US$106 million over an estimated 12-year mine life.
ASX-listed Prospect Resources says the “successful DFS provides a compelling basis for the company to drive towards completing additional project off-take arrangements (in addition to its existing off-take agreement with Sinomine), and securing project financing in anticipation of construction”.
Construction and mine development, to be managed by its 87 percent owned unit Prospect Lithium Zimbabwe (PLZ), is scheduled to be completed in the third quarter of 2020, with commissioning from November 2020.
Commenting on the development Prospect Resources Plc managing director Sam Hosack said: “The completion of the successful Definitive Feasibility Study on a base case of a 2,4 Mtpa development of the Arcadia Lithium Project is a great achievement. The DFS results position the company to become a key player in the global lithium market.
“The successful finalisation of this DFS is a testament to the strength of the Prospect owner’s team. A vast amount of work has been contributed to this DFS and validates my belief that Arcadia is Africa’s leading lithium development project with respect to its scale, grade, economics and team.
“This DFS represents a significant milestone for Prospect as we transition into development. We are excited by the opportunity to capitalise on the strong fundamentals of the lithium market, through the production of lithium concentrates.
“Based on the mine economics and financial strength of the project, we are moving swiftly to finance, develop and commence production at Arcadia.
“We have initiated pre-feasibility works to test the viability of a lithium chemicals plant on site, in order to upgrade our product and capture additional value from the lithium supply chain.”
The DFS has shown that the grade of lithium resources at Arcadia will provide significant return on investment for the miner.
“The Arcadia project is in a relatively unique position in that it has the possibility of being able to place its lithium concentrates both in the chemical and the glass/ceramics markets.
“This therefore enables its products to be suitable as source material for almost all end use sectors that use lithium The financial analysis assumes a lithium carbonate price that ranges between US$10 000 and US$12 000 per tonne, with a long-term lithium carbonate price of US$12 000 per tonne (landed China) from the third quarter of the calendar year 2023,” reads part of the study.
“A pricing formula has been applied to the lithium carbonate price in order to determine the spodumene and petalite prices, which include the pricing structure in the existing off take agreement and expected terms for the balance of concentrate.
“This results in the life of mine average price for spodumene and petalite concentrate of US$689/t FOB and US$457/t FOB respectively. LOM tantalum pricing has been set at US$75/lb Ta2O5 in concentrates grading 25 percent Ta2O5.”
Prospect has a number of operations in Zimbabwe, as well as exploration activities in Zimbabwe and the Democratic Republic of Congo.