A Fully Funded Lithium Development Play
Atlantic Lithium Ltd (formerly called Ironridge Resources) is advancing its flagship Ewoyaa Lithium Project towards mining. The project is fully funded to production following a US$103 million investment from Piedmont Lithium.
This investment means that Atlantic Lithium is fully carried to the commencement of mining, and importantly cash flow generation, following the completion of the pre-feasibility study for the Ewoyaa Lithium Project, a position that no other junior lithium developer is in.
Having an agreement for the construction funding already in place should smooth the development pathway for the company and ensure a rapid development timetable.
With the advancement of the Ewoyaa Lithium Project being funded to production by Piedmont Lithium, Atlantic Lithium is well-placed for future organic or acquisitive growth with a cash position of around US$20 million.
Atlantic Lithium has recently increased the JORC 2012 compliant mineral resource estimate at Ewoyaa by an impressive 47%, to 21.3 million tonnes at a grade of 1.31% Li2O.
Hot on the heels of the updated resource, Atlantic Lithium has also published an updated scoping study that made dramatic improvements on the Ewoyaa Project's economics compared to the January 2021 scoping study.
The December 2021 scoping study returned a post-tax NPV8 (net present value at an 8% discount rate) of US$789 million and a post-tax internal rate of return (IRR) of 194%, an increase of 129% and 55%, respectively, on the NPV and IRR from the January 2021 scoping study.
The project still has a relatively low capital expenditure (capex) requirement of US$70 million, only slightly up (2.8%) from the January study, despite life-of-mine spodumene concentrate production increasing by an impressive 43%.
Cash costs also remain low at US$249 per tonne of concentrate (C1 FOB), up 0.8% from the January 2021 scoping study.
By adding three additional years to the mine life at Ewoyaa, Atlantic Lithium has dramatically improved the economics of the project and with further exploration on already defined targets, it is likely that the mine life can be extended further, with Atlantic targeting 15-years. Atlantic Lithium has estimated that every additional year of production will add up to c. US$60 million in post-tax NPV.
We are anticipating additional milestones from Atlantic Lithium next year, including additional exploration and resource definition drill results, and the publication of a pre-feasibility study in H122.
Atlantic Lithium's management team made three discoveries in its previous guise as Ironridge Resources. They have sought to get the best value from the discoveries for shareholders by spinning out the gold discoveries into a new company, Ricca Resources Limited.
Atlantic's team arranged for an in-specie distribution of the Ricca shares to existing holders, targeted for 18 January 2022. Ricca will initially remain unlisted and has a significant cash balance of A$14.2 million to advance its gold projects, before seeking a listing on a public market in due course.
Introduction
Atlantic Lithium is a lithium focused exploration and development company with projects located in the West African countries of Ghana and Côte d’Ivoire, covering a total area of 1,334 km2.
In Ghana, Atlantic Lithium has interests in six exploration licences; two are centred around the Ewoyaa Deposit, another two licences are located west of Ewoyaa, while the remaining two licences are west of the Egyasimanku Hill Deposit (Figure 1). These licences are collectively referred to as the Cape Cost Lithium Portfolio by the company and cover a combined area of 560 km2. Atlantic Lithium also has a further four exploration licence applications, located around the Egyasimanku Hill Deposit (Figure 1). In Côte d’Ivoire, Atlantic Lithium has interests in two exploration licences that cover an area of 774 km2.
Figure 1 - Atlantic Lithium's Ghanaian Project Portfolio
Source: Atlantic Lithium
Anticipated Milestones
In the near term we are anticipating several important milestones from Atlantic Lithium, including:
- Regional exploration and target definition drilling are ongoing with four auger drill rigs on site.
- Additional assay results from the Phase Four drill programme at Ewoyaa, with c. 28,000 metres of drilling results pending announcement, expected late-21 to early-22
- Further resource drilling is anticipated to re-commence in early-2022
- Publication of pre-feasibility study for Ewoyaa, expected in the first half of 2022
The Cape Coast Lithium Portfolio
The Cape Coast Lithium Portfolio is subject to an earn-in agreement between Atlantic Lithium and Piedmont Lithium. Under this agreement, Piedmont will invest a total of US$103 million to acquire a 9.91% interest in Atlantic Lithium and a 50% interest in the portfolio, and through a series of stages that will see the Ewoyaa Lithium Deposit fully funded into production.
About Piedmont Lithium
Piedmont Lithium is a US-based development company seeking to become an integrated supplier of raw materials and minerals required for the energy transition away from fossil fuels and industrial markets.
The company is developing the 44.2 million tonne (1.08% Li2O) Piedmont Lithium Project, located in the Carolina tin-spodumene Belt of North Carolina (Figure 2).
Figure 2 - The Piedmont Project
Source: Piedmont Lithium
Its strategic location and anticipated low-cost lithium hydroxide production, mean the company is well-positioned to supply the fast-growing US electric vehicle industry.
A scoping study for the Piedmont Project, completed in June 2021, returned a post-tax NPV8 of US$1.9 billion and a post-tax IRR of 31%, based on an integrated lithium hydroxide plant producing c. 30,000 tonnes per annum over a mine life of 20 years, assuming a lithium hydroxide price of c. US$13,228 per tonne.
As well as its 9.91% interest in Atlantic Lithium, the company also owns a 37% economic interest in the 78.7 million tonne (1.04% Li2O) Sayona Lithium Project, located in Quebec.
Piedmont Lithium has a market cap of US$950 million and c. US$167 million in cash.
The company has established relationships with electric motoring giants TESLA and other US-based electric automobile manufactures.
Piedmont Earn-In De-risking Atlantic
Under Stage 1 of the Piedmont earn-in, Piedmont invested US$16 million to acquire 56,880,000 shares in Atlantic Lithium. This was completed in August 2021.
Stage 2 will see Piedmont invest a further US$17 million to complete a definitive feasibility study (US$12 million) at the Ewoyaa deposit, as well as complete a regional exploration programme to enhance the mineral resource estimate at Ewoyaa (US$5 million). On completion of this stage, Piedmont will earn a 22.5% interest in the Cape Coast Lithium Portfolio.
During Stage 3, Piedmont will fund the estimated capital cost to construct the mine at Ewoyaa, US$70 million, to earn a further 27.5% interest in the Cape Coast Lithium Portfolio.
As a result of this transaction, investors in Atlantic Lithium have access to a development stage lithium project that is fully funded to production. Securing the funding to develop a mine can often cause significant delays to a project's timetable, this will not be the case for Atlantic Lithium.
The development cost of most mining projects is funded by a mixture of debt and equity, with the initial cash flow generated from an operation being used to repay both the interest and the principal on the debt.
This funding agreement makes Atlantic very attractive compared to its peer group as it is not only de-risked from a funding viewpoint, but it will also not have to take on any debt, and as a result, the cash flow from Ewoyaa can instead be returned to shareholders or redeployed to advance or acquire other projects.
Piedmont Offtake Offers Alternative to China
Piedmont Lithium has also entered into a binding offtake agreement with Atlantic Lithium for up to 50% of the Cape Coast Lithium Portfolio's life of mine production of spodumene concentrates, as part of the funding agreement.
The offtake agreement’s pricing will be determined by a formula, which is at market price for lithium products, ensuring Atlantic Lithium maintains exposure to the value-add margins from upside to the lithium price.
Piedmont Lithium plans to construct the only US-based spodumene to lithium hydroxide conversion plant to supply battery manufactures in both the US and Europe providing a reliable alternative to Chinese dominated supply. Piedmont has already established offtake arrangements with Tesla and has established relationships with American and European car manufacturers.
Figure 3 - Ewoyaa Mineral Resource Estimate
Source: Atlantic Lithium
Figure 4 - Phase 4 Drill Results to Date
Source: Atlantic Lithium
Ewoyaa Lithium Project
Ewoyaa, located on the south coast of Ghana (Figure 1), is the most advanced project with Atlantic Lithium's Cape Coast Lithium Portfolio. A scoping study completed at the project in January 2021 returned a post-tax NPV8 of US$345 million and a post-tax IRR of 125%, demonstrating attractive economics.
Ewoyaa has a recently upgraded (47%-increase) JORC 2012 compliant mineral resource estimate of 21.3 million tonnes at a grade of 1.31% Li2O (3.24% LCE), but the project the potential to be much larger with additional exploration.
The bulk of the current mineral resource estimate (11.4 mt) comes from the Ewoyaa Main deposit (Figure 3), and is based on around 56,500 metres of drilling. Atlantic Lithium has already completed a further c. 28,000 metres of infill and extensional drilling, the results of which are pending and has not been included in this latest resource estimate.
Spodumene mineralisation remains open at depth and along strike and there are additional untested pegmatites within the immediate deposit area, providing potential for further resource upgrades in the future.
Atlantic Lithium is also currently undertaking a programme of regional exploration and target definition, with four auger drill rigs on site. The company is anticipating re-commencing resource drilling in early-2022.
Local Drilling Programme
The results of 25,612 metres of reverse circulation has recently been announced and included in the resource upgrade. This programme was designed to test new high-priority pegmatite targets, including outcropping spodumene pegmatite within the immediate Ewoyaa Lithium Project.
Five of these targets have had results returned from the laboratory, with all five returning significant results (Figure 4), including:
Okwesikrom Target
- 13 metres at a grade of 1.86% Li2O from a depth of 34 metres (GRC0199)
- 12 metres at a grade of 1.74% Li2O from a depth of 75 metres (GRC0204)
Anokyi Main Target
- 34 metres at a grade of 1.54% Li2O from a depth of 32 metres (GRC0219)
- 31 metres at a grade of 1.59% Li2O from a depth of 31 metres (GRC0223)
Figure 5 - Regional Drill Targets
Source: Atlantic Lithium
Figure 6 - Flow Sheet
Source: Atlantic Lithium
Figure 7 - Spodumene Concentrate
Source: Atlantic Lithium
Anokyi South target
- 18 metres at a grade of 2.24% Li2O from a depth of 39 metres (GRC0269A)
- 18 metres at a grade of 1.75% Li2O from a depth of 42 metres (GRC0235)
Ewoyaa North Target
- 50 metres at a grade of 1.36% Li2O from a depth of 77 metres (GRC0300)
- 24 metres at a grade of 1.3% Li2O from a depth of 55 metres (GRC0288)
Grasscutter Target
- 49 metres at a grade of 1.21% Li2O from a depth of 122 metres (GRC0368)
- 29 metres at a grade of 1.49% Li2O from a depth of 71 metres (GRC0362)
Regional Drilling Programme
Atlantic Lithium has only drill tested 13 km2 of it's 1,334 km2 ground holding to date. To initially assess the regional potential the company completed 1,936 metres of reverse circulation drilling at three regional targets: Ndasiman, Amoanda and Hweda, located respectively 9 kilometres (km), 8 km and 27 km from Ewoyaa (Figure 5).
Significant pegmatite widths between 40 metres to 80 metres (m) true width were intersected at Ndasiman and up to 30m true width at Amoanda. A review of these results is ongoing.
Scoping Study
The December 2021 scoping study defined production levels of 300,000 tonnes of spodumene concentrate per annum over an initial mine life of 11.4-years. This makes Ewoyaa one of the larger spodumene development projects.
Based on the scoping study, Ewoyaa is anticipated to generate life-of-mine revenue of US$3.44 billion, an increase of 121% on the January 2021 study.
The project will generate a life-of-mine EBITDA (underlying earnings) of US$2.0 billion, an increase of 137% on the January study, based on a spodumene concentrate price of US$900/t, up 38% from the price used in the January 2021 study.
Despite the large increase in economics the project still has a relatively low capex of US$70 million, up, 2.8%, from the January study.
Life of mine (LOM) spodumene concentrate production in the December 2021 study increased by 43% compared to the January 2021 study.
Cash costs remained low at US$249 per tonne of concentrate (C1 FOB), up 0.8% from the January 2021 scoping study.
Figure 8 - Sensitivity Analysis of the Scoping Study
Source: Atlantic Lithium
Figure 9 - Ewoyaa Cross Section
Source: Atlantic Lithium
Figure 10 - Infrastructure
Source: Atlantic Lithium
All of these improvements fed into a vastly improved NPV for the project with the December 2021 scoping study returning a post-tax NPV8 of US$789 million and a post-tax IRR of 194%, an increase of 129% and 55%, respectively, on the NPV and IRR from the January 2021 scoping study.
The Ewoyaa flow sheet is expected to consist of a conventional dense media separation (DMS) only (Figure 6), producing a premium 6% spodumene concentrate saleable product (Figure 7) at a 6.3mm coarse crush.
Alongside the production of an SC6 spodumene concentrate, Ewoyaa is now also expected to produce a feldspar by-product and a saleable direct shipping ore fines product.
Sensitivity analysis of the Ewoyaa Project demonstrated that the NPV is most sensitive to spodumene concentrate price and lithium grade/recovery (Figure 8). Changes in mining, processing, transporting and capital costs have a much lower impact on the projects' economics.
Geology
The Cape Coast projects are located in an area on the southern margin of the Cape Coast Batholith, a large 100 km by 200 km granitic intrusive complex, occurring along the southern central coastline of Ghana and part of the West African Shield. The batholith surrounds the Birimian metasedimentary rocks, Such as schists; mica schists, staurolite schists and garnet schists, which host the spodumene bearing pegmatites (Figure 1). These pegmatites are associated with smaller, kilometre scale, more fractionated granitic intrusives within the metasedimentary rocks. The pegmatites are generally steeply dipping to the northeast (Figure 9).
Metallurgy
Initial metallurgical studies on a 54 kg composite sample from diamond drill core has demonstrated that a high-grade spodumene concentrate (6.29% Li2O), with low level contaminants (Figure 7), can be produced with a high-recovery rate (85%) by simple crushing to 6.3 millimetres (mm) and gravity based dense media separation (DMS) without the need for flotation. While much more testing is required, these initial studies are favourable and indicate that the project could have a relatively low-capital intensity.
Infrastructure
The Ewoyaa Project is strategically located on the coast and near the Takoradi-Accra highway with a relatively short, 110 km, transport distance to the port of Takoradi (Figure 1 and 10). Ewoyaa is also located just 1 km from a high-voltage transmission line and around 45 km west of a 20 megawatt (MW) solar farm, which could be leverage to provide a low-cost and environmentally friendly source of power for the project.