Int’l Lithium pegs Mar­i­ana after-tax NPV at $192M (U.S.)

Stockwatch Daily - - MINES & METALS - Mr. John Wis­bey re­ports

IN­TER­NA­TIONAL LITHIUM Corp. has re­leased the re­sults of a pre­lim­i­nary eco­nomic as­sess­ment (PEA) for the Mar­i­ana lithium brine project lo­cated in the prov­ince of Salta, Ar­gentina.

PEA High­lights:

• 25-year mine life pro­duc­ing 10,000 tonnes per year of lithium car­bon­ate equiv­a­lent plus 84,000 tonnes per year of sul­phate of potash;

• The es­ti­mated cap­i­tal ex­pen­di­ture (capex) and op­er­a­tional ex­pen­di­ture (opex) are for a con­ven­tional brine ex­trac­tion fa­cil­ity, so­lar eva­po­ra­tion ponds and SOP pro­cess­ing with a level of ac­cu­racy of nega­tive 30/plus 50 per cent;

• Capex es­ti­mated at $243-mil­lion (U.S.) for 25-year mine life;

• Net present value of $192-mil­lion (U.S.) after-tax at 10-per-cent dis­count rate, in­ter­nal rate of rev­enue of 20-per-cent post­tax;

• Project re­sults re­main pos­i­tive, even with im­por­tant nega­tive vari­a­tions on the driver vari­ables, in­di­cat­ing project strength and re­silience; thus, the PEA study in­di­cates Mar­i­ana’s pro­posed 10,000 t/y LCE con­cen­trated brine and 84,000 t/y SOP fer­til­izer op­er­a­tion has the po­ten­tial to gen­er­ate strong eco­nomic re­turns.

The PEA was pre­pared by Ad­visian, a divi­sion of the Wor­leyPar­sons Group, for Mar­i­ana Lithium Corp. to pro­vide a PEA of its Mar­i­ana lithium brine project in ac­cor­dance with Na­tional In­stru­ment 43-101 — Stan­dards of Dis­clo­sure for Min­eral Pro­jects. The PEA tech­ni­cal re­port as­sesses the po­ten­tial eco­nomic vi­a­bil­ity of de­vel­op­ing the 14 ex­plo­ration li­cences (Mi­nas) that cover the Salar de Llul­lail­laco (the salar) and sur­round­ing area (23,560 hectares) for the pur­pose of ex­trac­tion of lithium brine re­sources and pro­cess­ing of two prod­ucts — lith4ium car­bon­ate equiv­a­lent and sul­phate of potash. All fig­ures are quoted in United States dol­lars. It should be noted that the com­pany did not play any sig­nif­i­cant part in the pro­duc­tion of the PEA re­port and that the con­clu­sions are there­fore those of the con­sul­tants. Cau­tion­ary note

The pre­lim­i­nary eco­nomic as­sess­ment is pre­lim­i­nary in na­ture, and it in­cludes in­ferred min­eral re­sources that are con­sid­ered too spec­u­la­tive ge­o­log­i­cally to have the eco­nomic con­sid­er­a­tions ap­plied to them that would en­able them to be cat­e­go­rized as min­eral re­serves, and there is no cer­tainty that the pre­lim­i­nary eco­nomic as­sess­ment will be re­al­ized. The PEA in­cludes the re­sults of an eco­nomic anal­y­sis of min­eral re­sources, and min­eral re­sources that are not min­eral re­serves do not have demon­strated eco­nomic vi­a­bil­ity. Cur­rent own­er­ship of the Mar­i­ana project is through a joint ven­ture com­pany, Li­tio Min­era Ar­gentina SA, a pri­vate com­pany reg­is­tered in Ar­gentina, owned 82.754 per cent by Gan­feng Lithium through its wholly owned sub­sidiary, Mar­i­ana Lithium Corp., and 17.246 per cent by In­ter­na­tional Lithium. In ad­di­tion, In­ter­na­tional Lithium has an op­tion to ac­quire an­other 10 per cent in the Mar­i­ana project through a back-in right.

John Wis­bey, chair­man and chief ex­ec­u­tive of­fi­cer of the com­pany, said: “It is good fi­nally to have re­ceived this pre­lim­i­nary eco­nomic as­sess­ment (PEA) show­ing a post­tax NPV for Mar­i­ana of over $190-mil­lion (U.S.) (over $250-mil­lion (Cana­dian) at cur­rent ex­change rates) with net an­nual cash flows of $96-mil­lion (U.S.) after pro­duc­tion starts. It is sig­nif­i­cant how much the high con­cen­tra­tion of sul­phate of potash is worth to the project, which is a large credit on top of the lithium rev­enues. Our present share in Mar­i­ana is 17.246 per cent and it would rise to 27.246 per cent if we ex­er­cised our back-in right, which would cur­rently cost us about $7-mil­lion (Cana­dian). It should be noted that the con­clu­sions of the PEA were pre­pared by Ad­visian based on work car­ried out by the project man­agers. The cut-off for data sup­port­ing the PEA is March 31, 2018. The process method­ol­ogy is based on the as­sump­tion that con­ven­tional brine ex­trac­tion and eva­po­ra­tion meth­ods will be the only method used for the pro­duc­tion of lithium and potas­sium com­pounds at Mar­i­ana. It is our belief that ad­di­tional value can be cre­ated for the project by use of ap­pro­pri­ate mem­brane tech­nol­ogy on site in Ar­gentina, and we will be sup­port­ive of ini­tia­tives to use this method to com­ple­ment the cur­rent plans for evap­ora-

tion. Ad­di­tion­ally, we are hope­ful that the es­ti­mate of 10,000 tonnes per an­num of pro­duc­tion and a 25-year mine life are on the con­ser­va­tive side, given the 1,248,000 tonnes of in­di­cated re­source and the 618,000 tonnes of in­ferred re­source re­ported in 2016. Nev­er­the­less, these solid num­bers in the PEA give us great en­cour­age­ment that Mar­i­ana has been worth in­vest­ing in and that, pro­vided that Gan­feng and we can to­gether fi­nance the project ap­pro­pri­ately, it is ca­pa­ble of de­liv­er­ing a sig­nif­i­cant re­turn to our share­hold­ers.” Pre­lim­i­nary eco­nomic anal­y­sis

The eco­nomic anal­y­sis of the Mar­i­ana lithium project is based on an op­er­at­ing ca­pac­ity of 40,150 t/y of 4.7 per cent lithium con­cen­tra­tion brine and pro­duc­tion of 84,000 t/y of SOP fer­til­izer prod­uct.

To per­form the project’s eco­nomic eval­u­a­tion, Ad­visian used a dis­counted cash flow (DCF) fi­nan­cial model with a 10-per-cent dis­count rate. Cap­i­tal and op­er­at­ing costs es­ti­mates are as shown in the fol­low­ing sec­tions. Other main in­puts for this model are an as­sumed ramp up and pro­duc­tion pro­gram, and a mar­ket and pric­ing fore­cast in­cluded herein. Re­sults of the model com­prise the project’s NPV and IRR. The at­tached ta­ble presents the project’s base case eco­nomic anal­y­sis re­sults.

(See ILC Ta­ble 1 on page 16)

Cap­i­tal and op­er­at­ing costs Cap­i­tal ex­pen­di­tures are based on an op­er­at­ing ca­pac­ity of 40,150 t/y of 4.7 per cent lithium con­cen­trated brine and pro­duc­tion of 84,000 t/y of SOP fer­til­izer prod­uct. Cap­i­tal equip­ment costs were ob­tained from in-house data and so­licited bud­get price in­for­ma­tion. The es­ti­mate is com­pli­ant to AACE Class 5 stan­dard. Ac­cu­racy of this es­ti­mate is ex­pected to be within a nega­tive-30-per-cent/plus-50-per -cent range.

(See ILC Ta­ble 2 on page 17)

(See ILC Ta­ble 3 on page 17)

Sum­mary and con­clu­sions:

• The tech­ni­cal so­lu­tions in­cluded in the PEA tech­ni­cal re­port are stan­dard, time-proven de­signs for main op­er­at­ing fa­cil­i­ties. This ap­proach pro­vides a solid, work­able base case to which other de­sign al­ter­na­tives can be re­lated and com­pared.

• Ad­visian has es­ti­mated capex and opex for a con­ven­tional brine ex­trac­tion fa­cil­ity, so­lar eva­po­ra­tion ponds and SOP pro­cess­ing with a level of ac­cu­racy of nega­tive 30/plus 50 per cent, in­clud­ing equip­ment, ma­te­ri­als, in­di­rect costs and con­tin­gen­cies dur­ing the con­struc­tion pe­riod, is es­ti­mated to be $243.4-mil­lion (U.S.).

• The project eco­nomic anal­y­sis in­di­cates that, for the base case, the after-tax NPV (10 per cent) is $191.7-mil­lion (U.S.) and IRR is 20.0 per cent.

• Project re­sults re­main pos­i­tive, even with im­por­tant nega­tive vari­a­tions on the driver vari­ables, in­di­cat­ing project strength and re­silience; thus, the PEA study com­pleted by Ad­visian in­di­cates the project’s pro­posed 10,000 t/y LCE con­cen­trated brine and 84,000 t/y SOP fer­til­izer op­er­a­tion has the po­ten­tial to gen­er­ate strong eco­nomic re­turns. A Na­tional In­stru­ment 43-101 tech­ni­cal re­port is re­quired to be filed, in con­junc­tion with the dis­clo­sure of the PEA in this news re­lease, within 45 days.

Afzaal Pirzada, PGeo, a qual­i­fied per­son as de­fined by NI 43-101 and a con­sul­tant to the com­pany, has re­viewed and ap­proved the all dis­clo­sure of sci­en­tific or tech­ni­cal in­for­ma­tion in this news re­lease.

About In­ter­na­tional Lithium Corp. In­ter­na­tional Lithium has a sig­nif­i­cant port­fo­lio of pro­jects, strong man­age­ment, and a strate­gic part­ner and key­stone in­vestor, Jiangxi Gan­feng Lithium Co. Ltd., a lead­ing China-based lithium prod­uct man­u­fac­turer. The com­pany’s pri­mary strate­gic fo­cus is now on the Mar­i­ana project in Ar­gentina and on the Raleigh Lake project in Canada.

The com­pany has a strate­gic stake in the Mar­i­ana lithium-potash brine project lo­cated within the renowned South Amer­i­can lithium belt that is the host to the vast ma­jor­ity of global lithium re­sources, re­serves and pro­duc­tion. The Mar­i­ana project strate­gi­cally en­com­passes an en­tire min­eral-rich evap­or­ite basin to­talling 160 square kilo­me­tres, which ranks as one of the more prospec­tive salars, or salt lakes, in the re­gion.

We seek Safe Har­bor.

Mau­rice Brooks, Kir­ill Klip, David Shen, Ross Thomp­son, Xiaoshen Wang, John Wis­bey

(ILC) Shares: 94,995,902

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