Premier African Minerals Limited (LON:PREM) saw its shares jump today after it said the value attributed to its Zulu lithium project in Zimbabwe was higher than expected in a scoping study.
in late afternoon trade, Premier African shares were up 5.9%, or 0.2p at 0.45p.
Consultant Bara worked on two options at Zulu: just to produce a concentrate; or for Premier to build its own lithium production plant.
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Bara estimated a value of US$127mln for a 15-year open cast operation mining a concentrate of spodumene and petalite, the source ores for lithium.
Upfront costs to build the mine in this case were estimated at US$64mln, with assumed prices of US$800 for spodumene and US$400/t for petalite and a discount rate of 10%.
Premier said these are below spot prices currently, which it expects to rise as demand for batteries for electric cars and power storage increases.
If Premier decides to build a new lithium carbonate processing plant rather than shipping concentrate it will be much more expensive, but the returns are also much greater.
Bara estimates an NPV (cash generated over life of mine) of US$524mln for an upfront cost US$238mln.
Fast payback
In both cases, Premier gets its money back in two years.
Peak funding for a concentrate mine would be US$38mln and US$178mln if it goes down the process plant route.
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Over the life of the mine, Zulu can generate more than US$1bn of revenues according to the study.
George Roach, Premier African’s chief executive, said he was pleased with the results, which were better than expected.
“The scoping study shows that there is an opportunity to develop a robust, low capital cost lithium mine with low operating costs.
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There is also scope to boost the mine life considerably through exploration around the main zone and elsewhere, he added.
“Strong prices for spodumene concentrates and sustained demand for high-grade petalite, coupled to compelling forecasts for the lithium market, support our confidence in the future of this project.”
A funding to raise working capital to pay for the scoping study and further exploration was heavily oversubscribed, with Premier pulling in £1mln at 0.4p compared to an original target of £500,000.
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