Lithium Producers on the Horizon, Part 2

Lithium Investing News recently had a look at four companies vying for the title of producer in the short term. In this instalment of Lithium Producers on the Horizon, we will have a look at two more companies making progress on their properties.

ASX-listed Galaxy Resources (ASX:GXY) has two exploration projects on the go. In a region known as “The Lithium Triangle” — which encompasses parts of Bolivia, Chile and Argentina — lies Galaxy’s Sal de Vida project. The deposit has the potential to be one of the largest and highest-grade undeveloped lithium brine deposits in the world. Sal de Vida has a JORC-complaint maiden resource estimate of 1.1 million tonnes of retrievable lithium carbonate equivalent and 4.2 million tonnes of potash equivalent. Galaxy anticipates annual production of 42,000 tonnes of lithium carbonate and 95,000 tonnes of potash over a 40-year period.

Following the maiden resource estimate, Galaxy released the results of a definitive feasibility study (DFS) for the project. It outlines a low-cost, long-life lithium and potash operation at Sal de Vida. The DFS returned a pre-tax NPV of US$643 at a 10-percent discount rate and a pre-tax IRR of 23 percent; post-tax, the company is looking at a NPV of US$380 million with 10-percent discount and an IRR of 19 percent. According to the study, the project has strong economics, with an estimated capex of US$369.2 million and average operating costs sitting at $2,200 per tonne (net of potash credits). Per the study, the company is looking into the development of both evaporation ponds for the lithium carbonate as well as a potash plant. A decision is expected once positive cash flow is sustained at the Jiangsu lithium carbonate plant in China.

Nemaska Lithium (TSXV:NMX) is a little farther down the pipeline than some of the other companies mentioned in this series; however, the company is currently working on a Phase 1 lithium chemical plant, which, when built, will be a smaller-scale version of the commercial facility. Once complete, the plant will facilitate the progress of a feasibility study. Nemaska’s project is located in the James Bay region of Quebec, similar to Galaxy’s James Bay project. The Whabouchi project hosts almost exclusively spodumene with a measured and indicated resource estimate of 19,639,000 tonnes of lithium. The project is touted as one of the largest and highest-grade spodumene deposits in the world.

Tianqi Group — most recently known for its buyout of Australia’s Talison Lithium — is a strategic partner holding 16.5 percent of outstanding shares. Nemaska also has a signed offtake agreement with Clariant Canada for the sale of its lithium hydroxide.

The company is currently working with a life of mine production of 3.8 million tonnes of spodumene concentrate that will be converted into 366,000 tonnes of battery-grade lithium hydroxide and 177,000 tonnes of battery-grade lithium carbonate. From the company’s preliminary economic assessment, released in October 2012, Whabouchi has an expected mine life of 18 years. Nemaska has a capex of C$454 million, including a contingency of $50 million and $15 million working capital. The project has an NPV of $567 million at an 8-percent discount before tax and an IRR of 23.3 percent.

Other companies abound

Many companies are working on lithium projects, though quite a few are still in their early stages of development.

Securities Disclosure: I, Vivien Diniz, hold no investment in any of the companies mentioned.

Related reading:

Lithium Producers on the Horizon

Lithium Hydroxide Production in Quebec: Interview with Nemaska Lithium