Pilbara Minerals (ASX:PLS) has released a prefeasibility study for its Pilgangoora lithium-tantalum project in Western Australia. It expects the project to produce 330,000 tonnes of 6 percent spodumene concentrate and 274,000 pounds of tantalite per year.
The study considers a 2-million-tonne-per-annum mining and processing operation. Overall, the project has a post-tax NPV of AU$408 million at a 10-percent discount rate, with a 44-percent IRR and a two-year payback period.
Currently, the mine life for Pilgangoora sits at 15 years, but Pilbara expects to increase that, with drilling currently underway as part of a definitive feasibility study.
“The strong technical fundamentals and excellent financial returns of the project are underpinned by a relatively modest capital cost estimate together with low forecast cash operating costs, which reflects the inclusion of significant tantalite by-product credits,” said Pilbara Minerals CEO Ken Brinsden in a statement.
“This means that the project will be capable of generating very strong operating margins and cash flows, producing a high-quality product that we expect will be in high demand as evidenced by the very high level of interest already displayed by our customer base,” he added.
Pilbara states in a release that the current spot price for spodumene concentrate is roughly US$600 per tonne, cost and freight, but that it used a more conservative estimate of US$456 per tonne, cost and freight. Overall, Pilgangoora’s operating costs stand at US$205 per tonne of spodumene concentrate, freight on board, including tantalum by-product credits.
Initial metallurgical testwork anticipates lithia recovery rates of 77 percent, and the company is aiming to further improve flotation recoveries for the project.
Furthermore, Pilbara has released its maiden ore reserve for Pilgangoora as part of the prefeasibility study — it sits at 29.5 million tonnes at 1.31 percent LiO2, 134 ppm Ta2O5 and 1.18 percent Fe2O5.
While lithium brine operations in Chile and Argentina account for a significant share of global production, it’s worth noting that Australia is actually the world’s top lithium-producing country. As Joe Lowry of Global Lithium has noted (and as we’ve discussed here previously), Australian hard-rock projects are getting more and more attention from Chinese lithium producers.
— Joe Lowry (@globallithium) March 10, 2016
It’s not surprising, then, that Pilbara has signed no fewer than eight memorandums of understanding regarding offtake agreements for production from Pilgangoora, accounting for 100 percent of what the project is expected to put out. Potential partners include North American, Japanese and international groups.
In any case, investors will certainly be keeping an eye on Pilbara, and on other lithium explorers and developers in Australia. Moving forward, Pilbara expects to complete a definitive feasibility study for Pilgangoora by the third quarter of this year, and will aim to begin commissioning at the project by the fourth quarter of 2017.
Shares of Pilbara initially spiked on Thursday, but closed down 8 percent, at $0.345. The company has seen its share price gain 43.75 percent in the past three months and 702.33 percent over the past year.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Pilbara Minerals is a client of the Investing News Network. This article is not paid-for content.