Plateau Energy Metals CEO Alex Holmes joined INN at PDAC to discuss his company’s progress at the Falchani lithium and Macusani uranium projects in Peru.
Plateau Energy Metals (TSXV:PLU,OTCQB:PLUUF) CEO Alex Holmes spoke with the Investing News Network at the 2020 Prospectors & Developers Association of Canada (PDAC) conference to discuss the recent preliminary economic assessment (PEA) on his company’s Falchani lithium project in Peru, emerging battery-grade lithium markets in Europe and North America as well as the company’s low-cost PEA-stage uranium project located 25 kilometers from Falchani.
The PEA released on February 4, 2020 demonstrates Falchani is capable of becoming a scalable, battery-grade lithium chemical project with a long mine life. Production is pegged at an average of approximately 63,000 metric tons of battery-grade lithium carbonate per annum (tpa) over 33 years growing to 85,000 tpa lithium carbonate. The PEA highlights economic returns of US$1.55 billion net present value of 8 percent and a 19.7 percent internal rate of return after-tax with the potential for future by-products.
“That’s a very interesting project in terms of how it would fit into the supply chain,” Holmes said. “Most importantly, is it’s a low impurity battery quality chemical product to fit into that chain. A lot of that has to do with the fact that the rock itself is clean to begin with, so we’re not having to deal with some impurities that you might find in some of the other deposit styles.”
In addition, the PEA shows that operations at the Falchani lithium project could be ramped up in three phases, with the last phase dependent on the resolution of the concessions currently undergoing an administrative process. According to Holmes, “In the third phase, we would become the largest lithium chemical project in the world, so that would put it larger than the biggest producer today. Now, the market’s not big enough for that today. However, based on the growth trajectory, we think it’s a project that can grow with the market. I think that helps us stand apart.”
China, which is experiencing a wave of electric vehicle adoption, is currently the focal point of global chemical conversion capacity and cathode production. However, Holmes says Plateau Energy is also looking for opportunities in the European and North American markets. “Europe is very rapidly advancing their supply chain, and they’re looking to build it out from cathode processing all the way through battery cell assembly plants, and then the car companies,” he explained. “The car companies are moving forward fast, so we’re looking at that as a possibility as well. North America, I think, will catch up in time. It’s Tesla (NASDAQ:TSLA) today, but we’ll get there. I think one of the pieces of our project that stands out — why it could be interesting to North American and European supply chains — is it’s a very clean lithium chemical project.”
Over the past 18 to 20 months, Plateau Energy has completed significant metallurgical test work to understand the best processing route for optimal recoveries. The focus for 2020 is on further optimizing the lithium process route with the goal of reducing the capital and operating expenditures for Falchani. The company is also looking at potential revenue streams from by-products such as cesium, rubidium and sulfate of potash (SOP), which is a high-value specialty chemical fertilizer. None of these by-products have been factored into the project economics as of yet.
“The SOP is a really interesting dynamic because the Peru market is about a third of the total South American import market,” Holmes said. “It’s been growing 18 percent a year for the last 10 years, so it has an advantage of feeding a market that has zero domestic sources today that relies 100 percent on imports. And it will ramp up as we ramp up in time.” The company is working on further metallurgical testing and is expected to share the results with investors by the end of March.
Plateau Energy’s Macusani uranium project is located about 25 kilometers away from Falchani. The Peruvian government is actively working on developing regulations for the export and transport of yellowcake, a requirement for any producing nation according to the International Atomic Energy Agency. Holmes said he expects to see those regulations finalized in the second half of 2020. “For us, that’s a clear sign the government support is there to see this through, to get those regulations in place. At that point for us, it really makes sense to refocus some of our capital on the uranium project. I think we’ll start off with small capital allocations to incrementally improve the project from an economic standpoint.”
The 2016 PEA for Macusani proposes the construction of a conventional open-pit mining operation with a centralized processing facility operating over a 10 year life with a throughput of approximately 30,000 metric tons per day. The company is planning optimization work programs aimed at updating the current PEA. “We can’t ignore the fact it’s a low capital cost, low operating cost project,” Holmes said.
Nuclear energy has been hailed as a bridge to a more renewable energy future. Although the uranium market has been in the doldrums over the past decade, Holmes is optimistic, especially considering the role nuclear could play as a stable source of global energy. The lack of new uranium exploration and development in recent years has the potential to create a supply and demand imbalance once the market turns around.
“There have been no new projects that have come online and the existing projects have either curtailed production, gone into care (and) maintenance or simply shut down completely,” Holmes said. “We don’t have to look far to Cameco (TSX:CCO,NYSE:CCJ), the great Canadian company who shut down MacArthur River. They don’t plan to bring that back on until uranium is US$50 a pound in the contract market. The contract market is roughly US$32 a pound. The spot market is US$26. By the time we get to US$50 per pound in the contract market, the material that is of zero value today could become a different story. I think the uranium equities, in general, will be in a much different position.”
For a more comprehensive update from Plateau Energy Metals CEO Alex Holmes, watch the video below.
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