Neo Lithium Corp (TSX-V:NLC) has unveiled a positive definitive feasibility study on the production of lithium carbonate from its 3Q project in Argentina, which showed an after-tax net present value (NPV) of US$1.129 billion, along with low pre-production capital and operating costs.
As reported on October 11 this year, Neo Lithium struck a deal with Chinese mining titan Zijin Mining Group, which will see the latter buy the firm and the project for a total of US$960 million.
"In a very short time since its discovery in December 2015, we have achieved every significant milestone at the 3Q Project on time and on budget," said Waldo Perez, CEO of Neo Lithium in a statement. "We have identified, defined, and confirmed one of the most valuable lithium resources in the world with one of the lowest projected operating costs and capital costs in the industry."
READ: Neo Lithium receives $960 million cash takeover offer from China's Zijin Mining
"We now deliver a project ready to be built to Zijin Mining Group Co., Ltd. at a significant premium to the prevailing trading price immediately prior to the announcement of the transaction that provides significant value to our shareholders," he added.
The NI 43-1-1 feasibility study examines the project as a conventional evaporation pond operation followed by concentrated brine purification and precipitation of lithium carbonate.
The processing method is unique to the 3Q project's high grade, low impurity brine, and will allow the firm to minimize water and energy consumption.
The average annual production was pegged at 20,000 tonnes (t) of lithium carbonate equivalent (LCE) at battery grade for the first 20 years with significant potential to expand, with a 50-year life of mine reserves. That represents just 31% of the entire resource.
The after-tax NPV at an 8% discount rate was put at US$1.129 billion, while the internal rate of return is 39.5% at an average price of US$12,321 per tonne of LCE with a 50-year life of mine and payback of 2 years and 3 months.
Pre-production capital cost was pegged at US$370.5 million (excluding deferred and sustaining capital costs) and operating costs were just US$2,954 per tonne of LCE.
The 3Q project hosts a measured and indicated (M&I) resource of 1.747 million tonnes (Mt) of LCE with an average 923 milligram per liter (mg/L) Lithium with 800 mg/l cut off and 5.369 Mt of LCE with 637 mg/L lithium at a 400 mg/l cut off.
In early October this year, a subsidiary of Neo Lithium purchased 357 hectares of property contiguous to the 3Q project because a small portion of the resource expanded into that ground, the company also noted in the statement.
The 3Q project sits in the province of Catamarca, the largest lithium-producing area in Argentina. The property covers around 35,000 hectares and the salar complex within this area is around 16,000 hectares.
Contact the author at giles@proactiveinvestors.com