PFS Expected to Result in Significant Uplift to Ewoyaa Economics
Atlantic Lithium is making positive progress with the pre-feasibility study (PFS) for the Ewoyaa Lithium Project, located in Ghana, West Africa.
The PFS is targeted for completion in the third quarter (Q3) of 2022 and is expected to see a significant improvement on the economics defined in the December 2021 scoping study, which returned a post-tax NPV8 (net present value using an 8% discount rate) of US$789mln and a post-tax internal rate of return (IRR) of 194%.
Atlantic recently completed metallurgical test-work, which will feed into the PFS, and supports using a gravity separation plant at a coarser primary crush size, which is likely to reduce the capital cost of the plant.
This development could also potentially lower the operating cost of the project, further improving the economics compared to the base case scoping study.
Additional improvements to the project's potential economics are expected to come from the JORC 2012 compliant mineral resource upgrade, announced in March 2022.
This upgrade saw Atlantic's resource base increase by an impressive 42% to 30.1 million tonnes at an average grade of 1.26% Li2O.
The previously completed scoping study was based on a resource base of 21.3 million tonnes for a two million tonnes per annum operation, producing an average c. 300,000 tonnes (t) per annum of 6% Li2O spodumene concentrate (SC6) over an 11.4-year mine life.
The larger resource base could increase the mine life, increase the size of the processing plant, or both, allowing the company to produce more spodumene concentrate per annum over a longer period of time. Atlantic has noted that there is a substantial improvement in project metrics with a mine life over 15 years, previously estimating that every additional year of production will add up to c. US$60mln to the post-tax NPV.
In addition, the SC6 price used in the scoping study is a conservative US$900/t, current auction prices are between US$5,000/t and US$6,500/t, this could have a material impact on the project's metrics.
In addition to the potential for the expanded resources to improve Ewoyaa's economics, there remains further potential to expand the existing resource base from the ongoing drill programme.
To date some 9,166 metres of reverse circulation (RC) drilling (52 holes) have been completed to date in the current drill programme, with assays pending.
These 9,166 metres were part of what was due to be a 19,000-metre drill programme; however, following the generation of new targets within the Ewoyaa pegmatite corridor to both the north and south of the current resource estimate (Figure 1), the size of the programme has been increased to a total of 37,000 metres and the number of drill rigs on site has increased to four. This programme will focus on exploration drilling and upgrading inferred and indicated resources including for the first two years of the operation in support of the DFS.
To date, only a small area of about 28 km2 has been auger tested, with an even smaller 13 km2 area drill tested within Atlantic's broader 560 km2 lithium portfolio in Ghana (Figure 2).
SC6 Price Rise Could Add Further Upside
In addition to the project-based developments that are likely to affect the PFS economics, it is also worth noting that the December 2021 scoping study was completed at an SC6 price of US$900/t, which is way below the current auction prices being seen by producers.
In its March quarter, Allkem Limited reported sales of spodumene concentrate completed at a price of around US$2,218/t (SC6) and said that strong conditions in the spodumene market are supporting advanced discussions for spodumene concentrate pricing in the June quarter of roughly US$5,000/t for SC6%.
Pilbara Minerals' recent end of May auction saw 5,000 mt of 5.5% spodumene concentrate sold at US$5,955/t, which is a price equivalent to $6,586/t for SC6.
Clearly, if these prices are sustainable there will be a dramatic uplift in the Ewoyaa Project's economics.
Potential Strategic Funding
Atlantic Lithium confirmed in May 2022, that it was approached by Ghana's Minerals Income Investment Fund (MIIF) regarding a potential investment in the company and has signed a non-disclosure agreement with MIIF; however, no discussions have occurred at this stage.
Figure 1 - Resource and Targets
Source: Atlantic Lithium
Potential Take Out
In April 2022, Atlantic Lithium appointed Canaccord Genuity (TSX:CF, LSE:CF) Limited as the company's financial advisor following the receipt of unsolicited enquiries from multiple parties interested in acquiring all, or part of, the company and/or its assets. Canaccord Genuity (TSX:CF, LSE:CF) Limited is assisting the company in evaluating the merit of these enquiries.
ASX Listing
Atlantic Lithium is also considering a secondary listing on the ASX.
Figure 2 - Regional Targets
Source: Atlantic Lithium