|The mine of Singapore-listed Alliance Mineral Assets Limited (AMAL) in Western Australia will generate very strong cashflow and high internal rate of return, according to a Pre-Feasibility Study released this morning.
The initial "starter pit" will enjoy a net cash flow before tax of A$223 million and a net present value (@10% discount rate) of A$150 million. The internal rate of return is superb at 185%.
The net present value is expected to increase significantly as additional ore reserves are defined, according to the study.
The payback period for the A$42 million capital cost of the project is rapid -- just 12 months, it added.
The study was done by Tawana Resources and a group of highly experienced consultants and contractors, said Tawana.
Australian-listed Tawana is the 50-50 JV partner of AMAL in developing the mine for production by early 2018, delivering lithium concentrates to Hong Kong listco Burwill Holdings worth at least US$200 million over 2018-2019.
Net cash costs for production are expected to be under A$400/tonne if an allowance is made for mining and crushing of stockpiled screened fines and middling concentrates containing about 25% of mined lithium were to be processed.
Only 20% of mine explored
"There is significant exploration upside potential at Bald Hill. The Company has only drilled 20% of the known pegmatite footprint and there are significant other portions of our tenements that are unexplored so we are very confident of being at Bald Hill for many years to come."
The capital cost for constructing a new 1.2Mtpa DMS plant, upgrades to the existing tantalum plant and infrastructure at the Bald Hill site, including all direct costs, is approximately A$42 million (+/- 5% to 15%).
This estimate includes a contingency of 10% and excludes pre-production operating costs.
Tawana Managing Director Mark Calderwood said: "The results show an impressive IRR and payback period. Given we have a modest sized 'brown-fields' construction project, we believe we are on track to become one of Australia's next lithium producers with our first shipment planned for the first quarter of 2018.
“We are keeping to our strategy of fast tracking lithium production to take advantage of the strong near-term demand whilst minimising dilution to our shareholders.
"Given our spodumene recovers so well through the DMS, and produces a high-grade concentrate, the two-phase production approach of getting the DMS commissioned in 2018 and then look to construct a LFC out of cash flow has assisted in the Bald Hill Project being one of Australia's lowest upfront capital cost, stand-alone lithium projects.
"It is exciting to be involved with the Project and the economics have highlighted attractive returns. Drilling is also continuing on infilling the current 8Mt Inferred Resource area with a view to converting the bulk of this into Reserves and to increase the mine life to 10 years."
Full Tawana Resources release here.