American Pacific Borate & Lithium Ltd (ASX:ABR) has enhanced the definitive feasibility study (DFS) released on December 17 for its Fort Cady Borate Project with a low capital expenditure starter project.
The cost-saving development measure was achieved by splitting phase one into two components, which delivers a pathway to production but substantially lowers targeted financing.
All other areas of the DFS remain consistent including the mining and processing of boric acid and the life-of-mine.
The company plans to advance financing discussions and start detailed engineering, with phase-one construction targeted to begin in quarter four 2019.
ABR chief executive officer Michael Schlumpberger said the company was delighted with the DFS enhancements, including the standalone low-capex project.
The first phase in the starter project, phase one-A, will target the production of 40,000 tonnes of sulphate of potash (SOP) and 6,000 tonnes of boric acid.
Phase one-B will increase boric acid production to 90,000 tonnes a year while using knowledge obtained through the smaller-scale phase one-A operation to optimise production.
Fort Cady is rare and large colemanite deposit and is the largest known contained borate occurrence in the world not owned by the two major borate producers Rio Tinto and Eti Maden.
The JORC-compliant resource at Fort Cady comprises 13.93 million tonnes of boric acid.
Splitting the first phase has delivered exceptional financial metrics including a capex of US$36.8 million inclusive of a 13% contingency, reduced from the initial estimate of US$138 million.
Unlevered post-tax net present value with a 10% discount is $315 million and the internal rate of return is 58.3%.
With the decrease in pre-production capex of about 75%, the starter project will be financeable on a standalone basis.
Total capex for the project has increased by 7% but ABR expects the financing and technical benefits delivered will far outweigh the additional cost.
Summary of Fort Cady production by phase
Schlumpberger continued: “We now have pre-production capex of only US$36.8 million and a pathway to phase three that has an annual EBITDA in the first full year of production of more than US$340 million.
“We have made the Fort Cady Project easier to finance, while limiting likely share dilution and preserving a massive EBITDA target in full production.
“Our ability to include such a low-capex starter project emphasises how unique the Fort Cady project is in the world of mining.”
The enhanced DFS estimates total cash costs of production, including by-product credits, as less than US$100 a tonne.
SOP prices in the high-priced Californian market are estimated to be over US$700 a tonne.
The production and sale of the 40,000 tonnes of SOP is unlikely to result in a reduction of selling price as the US is currently a new importer of SOP.
Route from Fort Cady to the port of Los Angeles