Lithium Universe has approved a final investment to progress its Bécancour lithium refinery in Canada, having presented a definitive feasibility study (DFS) that tips a net present value of US$718m (A$1.128b).
The company has approved a final investment in the refinery, based on the study results, and will now aim to secure US$549m (A$862m) in funding to construct the facility.
Lithium Universe expects to generate an EBITDA of US$148m (A$232m) from an annual revenue of US$383m (A$601m) over a 3.9-year payback based on the price assumptions used in the DFS. The DFS assumptions are higher than the current lithium spot prices.
The company says the refinery will generate a 21 per cent internal rate of return, based on forecast prices of US$1170 (A$1838) per tonne of spodumene concentrate (SC6) consisting of 6pc lithium content and US$20,970/t (A$32,952/t) of lithium carbonate.
Actual spot prices for the lithium materials are US$775/t (A$1217/t) SC6 and US$10,680/t (A$16,782/t) for lithium carbonate.
The break-even cost is estimated at US$740/t (A$1162/t) SC6 and US$14,000/t (A$22,000/t) for lithium carbonate, on the expectation it will produce 18,270 tonnes per annum of battery-grade lithium carbonate.
With expectations that lithium pricing will improve in the coming 12-18 months as the supply-demand balance improves, management believes its financial modelling shows that the company has a compelling and economically viable project on its hands.
It expects lithium prices will correct even faster than anticipated due to supply-side pressures, as the impact of lithium supply cuts from mines placed on care and maintenance or reductions in planned production levels begin to kick in.
The company says the demand for lithium is being underestimated. Sales of electric vehicles in China are continuing at pace and exports of Chinese EVs have skyrocketed from $3 billion in 2020 to $35b annually.
Production levels of electric buses and trucks slip under the radar due to insufficient tracking of production levels. They require 5-10 times greater battery capacity than passenger EVs, the additional potential demand from this sector could contribute to future supply issues.
Lithium Universe says the project will provide a solution to lithium conversion failures and start-up issues that have occurred globally, given management’s deep lithium experience and the use of proven new-age operating technology used in the Jiangsu-manufactured refinery.
The company selected a smaller, off-the-shelf Jiangsu-style refinery in preference to larger, more difficult-to-operate plants. Its initial focus will be on producing lithium carbonate, an essential feed for the lithium-iron-phosphate batteries used in electric vehicles.
The company believes the plant will be ideally positioned as a trans-Atlantic lithium conversion facility, with important cost benefits from sourcing cheap power using Hydro Quebec’s green energy and benefitting from United States-Canada tariffs.
It plans to obtain spodumene feedstock from Canadian sources, in addition to Brazil and African supplies and aims to supply the huge North American EV battery market.
Lithium Universe chairman Iggy Tan said: “The strong NPV and returns for the project indicate an economically viable project, the board has made the final investment decision and the project is now proceeding to the funding stage. An equity and debt advisor will be engaged to lead the funding outreach program, aimed at securing strategic partners at the project level to support project financing.”
The company’s decision to explore the best available funding options for the project will see it engage in offtake discussions with original equipment manufacturers to lock in supply deals and investigate the potential for funding offers from vehicle manufacturers.
Lithium Universe released its preliminary feasibility study in October 2024 and says the follow-up definitive study confirms the viability of a strong lithium conversion facility. It says the refinery could contribute to the lithium supply chain and help close the lithium conversion gap, which the company estimates could be about 700,000t of lithium carbonate by 2028.
The definitive study puts capital costs 11pc higher than in the prefeasibility study, primarily due to including a zero liquid discharge system costing $30m so that all the process water can be recycled and reused onsite.
The Lithium Universe team driving the project forward have bucketloads of lithium experience across all facets of the industry. Should the company secure the necessary funding for the Canadian project, the smart money might start betting on a successful outcome.
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