8 March 2019
(LON:BGS) | A$0.20 | US$36m | Buy | TP : A$0.55
Receives Environmental Permit for Goulamina Lithium Project
Birimian has announced that it has received the signed Environmental Permit from the Minister for the Environment of Mali for its Goulamina lithium project. The permit includes standard conditions to ensure the company maintains its high level of environmental performance. Birimian is advancing the project to achieve the milestones required for the next stages of development.
COMMENT: Birimian’s 100%-owned Goulamina lithium project in south-west Mali is one of the world’s ten largest hard-rock lithium deposits. This is another positive step in progressing the project and follows the recent appointment of new Managing Director Mr Chris Evans (3 February 2019) and the appointment of Mr Eric Hughes as Chief Financial Officer and Company Secretary (26 February 2019).
A PFS was completed in July 2018 demonstrating the project’s potential to become a globally significant, long-life, high-return spodumene concentrate producer. Biriminan completed an equity raising of A$5.25m through a placement of 35m shares at A$0.17/share on 3 January 2019. The placement allows the company to continue its programme of works at Goulamina.
New Managing Director Chris Evans is an experienced project delivery and operational management expert who was most recently the Chief Operating Officer of Altura Mining. During his tenure, Altura progressed its hard-rock open pit lithium mine in Western Australia from exploration to production and export, expanding from a handful of employees to over one hundred as well as utilising a large contracting workforce.
We initiated coverage of Birimian in mid-October 2018 [Birimian Limited — High-quality African Lithium Development, 18 October 2018] and maintain our BUY recommendation and Target Price of A$0.55.
Goulamina is one of the Top 10 largest hard-rock lithium deposits — Current resources total 103Mt grading 1.34% Li2O, containing 3.4Mt of lithium carbonate equivalent (LCE). The resource remains open in all directions and a number of significant targets in the vicinity remain to be tested, offering potential for further increases.
PFS showed a 54,000tpa LCE spodumene concentrate producer with a mine life of over 16 years and returned a 40% IRR — The PFS of July 2018 studied the development of Goulamina as an open-pit mine and a gravity/flotation-based processing plant. The 31Mt reserve grading 1.56% Li2O (containing 1.2Mt LCE) supported production of 54,000tpa LCE contained in a 6% spodumene concentrate for 16 years. AISC were US$349/t CIF China and the initial capital costs were US$199m. At an average spodumene concentrate price of US$666/t, the PFS returned a post-tax NPV10 of US$490m and a robust IRR of 40%.
Maintaining BUY rating and target price of A$0.55 — We base our target price on a risked SotP NAV assuming a lithium concentrate price of US$666/t and a TP/NAV multiple equivalent to 0.2x. Having demonstrated attractive returns in the PFS, we believe that securing offtake arrangements, completing the DFS and finalising debt finance will significantly de-risk the project’s development and should act as a catalyst for a re-rating of the company.