Excerpts from Canaccord Genuity's report
Analyst: Reg Spencer
Investment Highlights
Joint Venture partners Tawana Resources (TAW:ASX) and Alliance Mineral Assets (40F:SGX) have rapidly emerged from relative obscurity to soon join the ranks of lithium producers through the planned development of the Bald Hill Lithium/Tantalum project in Western Australia.
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In our view, the project stands apart from many in its peer group - significant established infrastructure results in low capital costs and a short, ~9 month lead time to production, while favourable metallurgy should see the production of an in-demand, high quality spodumene concentrate. In the interim, a targeted resource drilling program has the potential to prove up a substantial mine life.
Bald Hill – emerging from a tantalum past to a lithium future
The Bald Hill lithium/tantalum project is located 50km south of Kambalda, and 340km north of the Port of Esperance, Western Australia. The project was previously the site of tantalum production (2001 to 2005), before AMAL acquired the project in 2014, and completed an upgrade of the tantalum processing plant and site infrastructure. 
The project’s focus shifted to its lithium potential in 2016 via a Joint Venture with TAW, who can complete its 50% earn-in into the project through funding A$12.5m in development costs.
AMAL’s previous investment in plant and infrastructure has afforded the project a major head-start as a near term lithium producer, reducing production lead times and capital costs (relatively simple retrofitting of a spodumene recovery circuit) compared to greenfield developments.
Mine life potential supported by substantial exploration target
TAW/AMAL have completed +14,000m of drilling since Oct’16, with on-going resource drilling targeting extensions of known pegmatite mineralisation and near mine targets within the existing Mining Lease.
TAW/AMAL have set an Exploration Target of 20-30Mt at 0.9- 1.4% Li2O by mid’17, and a larger target of 30-50Mt at 0.9-1.4% Li2O by end’17, which if achieved, could support a mine life of +13 years at planned production rates. An interim resource estimate to support project a feasibility study is expected in the coming weeks.
Table: Project valuation estimates and sensitivity (A$)
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NPV10% (100%) |
Base Case |
'17 "benchmark" US$850/t |
High Case US$950/t |
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Mine life - 13 years |
360.8 |
462.8 |
551.6 |
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Mine life - 10 years |
308.0 |
395.7 |
472.9 |
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Mine life - 7 years |
234.1 |
301.7 |
362.6 |
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Source: Canaccord Genuity estimates |
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Feasibility study to confirm near term production
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"Project economics should benefit from low capital costs (owing to existing plant and infrastructure) and the likelihood of strong operating margins from high spodumene concentrate pricing and significant tantalum by-product credits." |
TAW/AMAL are also nearing completion of feasibility studies for a production scenario at Bald Hill targeting 120-160ktpa of +6% Li2O spodumene concentrate (17-23ktpa LCE).
A feasibility study is planned for completion in early Q2’17, and based on short development lead times, Bald Hill could be in production as soon as Q1’18.
Full Canaccord report here.