Lithium Americas advances development of Cauchari project

Lithium Americas (TSE:LAC) reported Monday that it has so far spent more than $28 million to advance its promising Cauchari-Olaroz property in Argentina to feasibility stage, with over $25 million of cash left in the bank.

For the year-ending February 28, the lithium explorer spent $19.5 million on exploration and engineering activities at the site.

"We continue to scale up our operations on-site such as the completion of production wells enabling the company to undertake testing required to move measured and indicated resources to proven and probable reserves, and the completion of larger scale evaporation ponds enabling the company to produce industrial quality lithium carbonate on site," said president and CEO Dr. Waldo Perez.

After defining the Cauchari project as the world's third largest lithium brine resource last year, the company also proved the property's vast economic potential, announcing the results of a preliminary economic assessment (PEA) on the deposit last month.

The PEA, conducted by engineering firm ARA WorleyParsons, was based on a two-phase design plan for a 40,000 tonne per year lithium carbonate facility, and indicated an after-tax internal rate of return as high as 26%, with cash operating costs of just $1,434 per tonne - one of the lowest in the industry.

The report also estimated an after-tax net present value, at an 8% discount rate, of $715 million, based on a long-term lithium carbonate price of $5,500 per tone. Construction for the first 20,000 tonne-per-year phase is expected to begin in 2012, with the remainder of work set to start in 2016.

Lithium carbonate, a chemical compound of lithium, carbon, and oxygen, is used for the manufacturing of lithium-ion batteries, which are increasingly in high demand due to their use in a wide range of portable consumer electronic devices, from mobiles to iPads.

Depending on the design and chemical compounds used, lithium-ion batteries can produce over twice the voltage of an ordinary zinc-carbon or alkaline battery.

Therefore, owning a low-cost lithium brine operation will have a colossal score of benefits. The company's Cauchari project has a lithium brine resource with a low magnesium content, reducing the cost requirements associated with the chemicals used in the production process. In addition, power in the proposed production plant can be produced from natural gas - accessed from a pipeline located just 50 kilometres north of the site.

The base case scenario used in the PEA study also assumed the production of just lithium carbonate, even though potash and boric acid are expected to be by-products of the lithium brine production process, potentially adding substantial value to the project.

In December, the Cauchari project was defined as having 5.3 million tonnes of measured and indicated lithium carbonate resources, plus an additional 2.7 million tonnes of inferred resources.

According to the PEA, given the huge size of the resource, the project is expected to have a long 40-year mine life, which at 40,000 tonnes per year of lithium carbonate, would result in the depletion of only 50% of the measured and indicated resource.

Lithium Americas said that a definitve feasibility study is scheduled for completion in the first quarter of 2012, with mine construction still targeted for the latter half of next year.

The company, which was recently included in the Global X Lithium Exchange Traded Fund, reported losses of $5.8 million for the year. It had $25.8 million in cash and equivalents at fiscal year-end, with positive working capital of $24.5 million.