Plymouth launches feasibility study for San Jose lithium

Plymouth Minerals has wasted no time in kicking off a feasibility study into its exciting San Jose lithium-tin play in Spain after easily locking away a $6.5m capital raise last month.

The raise, which was headlined by Canaccord Genuity and Hartleys, should provide enough funding for Plymouth to complete the feasibility study this calendar year.

Under the terms of Plymouth’s farm in agreement, the completion of the feasibility study will see Plymouths shareholding in the San Jose JV with partner Valoriza Mineria S.L increase from 50% currently to 75%.

The ASX-listed aspiring lithium producer said in a market update that it had also submitted all relevant documentation to the authorities in Extremadura, Spain, to finalise the process of lodging a mining licence application for San Jose.

The San Jose project looks like becoming one of Europe’s more serious lithium producers right in the heart of that continent’s soon to be burgeoning battery manufacturing hub.

Plymouth said it had taken the important operational and symbolic step of fast-forwarding the project towards production status by transferring the registered address of the JV company, in which it has a 50% stake, to Caceres, Spain, where field operations have been located since 2016.

In a market update this week the company said, ‘Engagement with local stakeholders will now increase and the JV’s relocation to Caceres is important in facilitating this. The increase in administrative and permitting activities will lead to the hiring of additional people working in Caceres going forward,’ Plymouth said.

Plymouth said geotechnical and metallurgical drilling will commence this month with a small 1,500-2,000m programme planned.

‘This geotechnical drilling is designed to provide confirmation of geotechnical data required for final pit design. It is expected that this additional data will allow an increase in the wall angles, leading to a positive impact on strip ratio and project economics,’ the company said.

‘The metallurgical drilling will deliver representative bulk sample material for larger-scale test work to produce increased quantities of battery grade lithium carbonate. This programme will deliver representative material planned for the first several years of projected mine life and is important in delivering inputs for Bankable Feasibility studies.’

San Jose’s bright start to 2018 follows a scoping study in September that delivered impressive results for an operation going all the way through to battery-grade lithium carbonate. Earlier last year a maiden JORC resource figure published after an in-fill drilling program showed San Jose to be a world-class lithium “mica” deposit.

The global resource for the project is 92.3 million tonnes grading 0.6% lithium dioxide capable of producing 1.3m tonnes of lithium carbonate equivalent. Plymouth has an additional exploration target of at least another 1.3m tonnes of lithium carbonate equivalent.

San Jose also boasts a high-grade core of 16.5 million tonnes grading 0.9% lithium dioxide.

Plymouth has a number of major logistical advantages at San Jose with a gas pipeline running parallel to the project and there is a fully sealed road less than a kilometre away in the other direction.

Spodumene producers mostly have to beneficiate their product from around 1% out of the ground up to about 6% lithium oxide to make it economic to be shipped to China, where it is processed into battery grade chemicals such as lithium carbonate.

The process of lithium miners producing their own battery grade chemicals on site is thus rarely profitable or feasible, given the massive energy required to roast the spodumene before processing it into lithium carbonate.

However, the gas pipeline at San Jose empowers Plymouth to turn their lithium mica deposit straight into lithium carbonate on-site.

The scoping study was based on a long initial mine life of 24 years, producing an average of 12,000 tonnes of lithium carbonate per annum. The estimated capex was US$273 million, with average C1 costs of less than US$5,000 per tonne of lithium carbonate, ranking it well down the cost curve of global producers.

Based on a highly conservative sales price assumption of US$10,000 per tonne, the project would generate an IRR of 28% and payback its capital of USD$273m in just 2.7 years according to Plymouth’s scoping study.

Remarkably, it is expected to turn out an annual operating surplus of around USD$75m a year.

San Jose shows an NPV of USD$401m based on a lithium carbonate price of USD$10,000 which is around half the current spot price. If Plymouth can average just USD$12,000 a tonne then the NPV blows out to USD$634m.

At USD$18,000 a tonne, which is the lower end of the current spot market, the project NPV is worth a staggering USD$1.33b.