Argosy Minerals Limited (ASX:AGY) has completed the preliminary economic assessment (PEA) for its Rincon Lithium Project in Argentina.
The PEA outlines a 16.5-year mine life producing about 10,000 tonnes per annum of battery-grade lithium carbonate, confirming the potential for long-life, sustainable commercial-scale production with strong project economics.
The company is now in stage I offtake discussions and will soon complete construction of the remaining stage II evaporation ponds.
Independent engineering firm Primero Group, supported by AQ2 Pty Ltd and Benchmark Mineral Intelligence, prepared the PEA.
Argosy managing director Jerko Zuvela said the company was delighted to deliver the Rincon project’s PEA.
He said: “[It] confirms that our project is one of the best new lithium development projects worldwide in terms of high investment returns, EBITDA margins and market significance.
“The PEA, together with our operational stage I plant, provides Argosy with a convincing investment proposition to secure additional project finance and strategic partnerships to continue our progress to commercial development.
“The results of the PEA further validate the company’s fast-track development strategy to fully develop the Rincon Lithium Project toward commercial production.”
Project map with the newest tenement acquisitions labelled
Highlights of the PEA include a pre-tax net present value (NPV) of $554 million using a 10% discount rate, which provides an internal rate of return (IRR) of about 53% and an EBITDA margin of 61% for the base case scenario.
Two production scenarios were considered in the PEA, with the second being an accelerated development case of 15,000 tonnes per annum with an 11-year mine life.
Each case was assessed with two different forecast lithium carbonate prices: Benchmark Mineral Intelligence’s independently assessed long-term forecast price of US$13,000 a tonne and a price of US$15,500 a tonne, based on recent spot export prices for battery-grade lithium from South America.
Argosy selected as its base case scenario the 10,000-tonne production rate and forecast price of US$13,000 lithium price, which gives an initial capital cost of around US$140.9 million.
Global price forecast for lithium carbonate 2011-2040. Source: Benchmark Mineral Intelligence
The company achieved a key milestone in the September quarter, producing a scalable chemical process solution that will turn Rincon’s brines into battery-grade quality lithium carbonate products.
Argosy believes the exclusive chemical process technology is effectively proven for utilisation of future development stages at the Rincon Lithium Project.
About 500 kilograms of lithium carbonate product has been produced to date.
Battery-quality LCE product from the Rincon project
In his presentation at the Technology and Low Emission Minerals (TLEM) Conference in Perth, Zuvela told the audience that being in the lithium business necessitated being a chemical processing company.
He said: “Given that these South American salars have been in business and operations for the last 25-30 years, obviously there have been many companies that have tried to produce from those areas.
“Rather than being effectively mining … you’re really a chemical processing business when you’re in a lithium business – you’re producing chemicals and Argosy will become a chemical processing company rather than a mining company.
“If you don’t process the raw materials … to the battery-quality end product, which is the carbonate or hydroxide, you don’t have a saleable product.”
As part of the PEA Argosy recently upgraded its lithium carbonate indicated JORC resource by 18% to 245,120 tonnes of lithium.
Because of its indicated category, the upgraded resource was fully utilised for life-of-mine and production modelling in the PEA.
The updated resource estimate exceeds Argosy’s expectation and forms the basis for sustainable commercial production targets and long-term life-of-mine modelling.
Potential by-product revenue from the production of potash and magnesium hydroxide at Rincon was excluded from the economic analysis.
Argosy's stage I industrial-scale pilot plant
READ: Argosy Minerals demonstrates chemical process for battery-quality lithium production at Rincon
In the current December quarter, Argosy has a busy schedule of expected news flow.
Work will continue at the stage I industrial-scale pilot plant producing battery-quality LCE product including scaling up to increased production.
Construction works are expected to complete this quarter for the stage II evaporation ponds and commercial scale processing plant development works will continue.
Regulatory permitting for commercial-stage construction is ongoing, as well as discussions with potential customers and strategic partners.
Speaking to Proactive Investors on the sidelines of the TLEM conference, Zuvela said construction would begin as soon as funding comes in.
He said: “The product has been tested by Asian end-users to determine what sort of customisation we need to do to meet their specification requirements.
“We’ve shown we can produce a generic battery-quality product, and now it’s customising that processing of product to meet the exact requirements of potential offtake parties we want to deal with, and obviously those offtake parties we want to be strategic investors to help us fund the construction of the project.
“To build a full-scale commercial plant it might take about a year and a half, but we can do it in modular stages, so we could have something potentially constructed within 12 months and obviously start producing thereafter.”
Argentina's Lithium Triangle
Rincon comprises about 2,794.4 hectares of significant lithium and associated infrastructure services, as well as mining easement landholdings for future stage III development and commercial production.
Funding is in place to continue stage I industrial-scale pilot plant operations and complete stage II evaporation pond construction.
This includes cash in hand of $4.951 million as of the September quarterly report and the company is confident it will secure the necessary funding for full-scale commercial-stage development.