eBusiness Weekly
Golden Sibanda
Australia Stock Exchange (ASX) listed electronic vehicles battery lithium mining firm; Prospect Resources says the net present value (NPV) of its Zimbabwe lithium project has jumped 18 percent to $401 million on stronger global lithium carbonate prices.
Prospect Resources and Hong Kong listed Sinomine Resources signed in November last year a conditional placement and framework agreement under, which Sinomine will invest $10-million, part of an off-take agreement, through a share placement, priced at 6c a share.
The two agreed to a battery lithium offtake agreement on production from the Arcadia Mine for 390 000 tonnes of spodumene concentrate and more than one-million tonnes of petalite concentrate over a proposed seven-year offtake period in mine’s the first phase.
Prospect announced that certain terms under the conditional offtake agreement between Prospect Resources Plc and its Zimbabwean subsidiary, Prospect Lithium Zimbabwe and Sinomine Resources, had been favourably renegotiated in respect of the spodumene and petalite pricing formula such that the NPV of the Arcadia Lithium Project located near Harare had increased by $61 million, from $340 million to $401 million.
The spodumene and petalite pricing formula, consistent with other industry contracts, is linked to the lithium carbonate price. NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting to analyze the profitability of a projected investment or project.
A positive net present value indicates that the projected earnings generated by a project or investment (in present dollars) exceeds the anticipated costs (also in present dollars).
Generally, an investment with a positive NPV will be profitable, and an investment with a negative NPV will result in a net loss.
Prospect has already completed building a pilot lithium carbonate plant in Kwekwe, which is already meeting or exceeding electric vehicle lithium battery grade specifications.
However, Prospect Resources needs to first establish a 240 000 tonnes a year concentrate plant and later mobilise funding to upgrade the lithium carbonate pilot plant to a large-scale facility.
Lithium carbonate piles to 100kg
Since its completion recently, the lithium carbonate plant has consistently churned out battery grade lithium carbonate, at a small-scale, which has seen an inventory of 100 kg produced at the plant stockpiled. The lithium carbonate production rate will be maintained monthly.
The stockpile awaits further purification to battery grade, but the same plant has already successfully processed to EV batter grade lithium carbonate, for instance managing lithium carbonate production amounting to 13kg within only a week of production up to the 11th of this month.
The plant has managed to produce at an average purity of over 99,6 percent and the company said the plant “is meeting or exceeding electric vehicle lithium-ion battery grade specifications”.
This product is expected to be made available for sale; and due diligence purposes by prospective customers.
Over 70 million light-duty Battery-Electric Vehicles will be sold in 2032, generating close to three trillion United States dollars in revenue. The sales of these vehicles will be highest in developed countries, which are in the process of being blanketed by networks of charging stations.
The auto market is witnessing a seismic shift that parallels the mobile phone revolution. Besides transition to clean energy, this shift encompasses intelligent, autonomous and connected vehicles that will improve transport efficiency while meeting energy-saving and emission-reduction targets.
Prospect amends lithium offtake agreement
The ASX listed EV batteries lithium producer said it had also amended the offtake agreement with Sinomine Resources, which resulted in the new offtake agreement providing for 70 percent of original production volumes over the first seven years of phase 1 output.
“Offtake volumes are now classified as tonnes of spodumene, petalite and lithia units, giving Prospect the flexibility to alter supply quantities of spodumene and petalite provided the total lithia units supplied are satisfied,” Prospect said in an update.
The surplus is expected to give Prospect flexibility to negotiate off-take terms with other lithium downstream customers and enable Prospect to divert additional spodumene and petalite volumes to a proposed company owned, lithium carbonate facility.
Prospect also cancelled the build and finance component of the original transaction. Cancellation of the build contract for the process facility, mine and associated infrastructure onsite enables Prospect to dictate the plant construction timetable and process. Mine development commenced by way of site preparation, land clearing and construction of the contractor village. These works are ongoing. Further works commenced with DRA with regards to upfront plant engineering and design services.
Mine development continues in earnest; ERP (connecting multiple disparate business processes and data of the company into an integrated cohesive structure for total enterprise resource management) implementation (‘go-live’) is planned for September after 5 months of configuration offline.
Other programmes planned for the September 2018 quarter include the issue of engineering drawings for fabrication and construction, baseline the schedule and budget, appoint primary construction contractor and commence earthworks and civil works. The company will also select primary fabricators and suppliers to facilitate award process, structural, mechanical, piping, electrical and instrumentation processes.
About lithium
The lightest and least alkali metal, lithium enjoys widespread commercial use in grease, dryers, air conditioners, medicines and a fast-rising call from the battery and renewable energy sectors.
Deposits in Zimbabwe include deposits at Kamativi Mine, Bikita Mine, Zulu Project, Arcadia Lithium Project. The country also has some lithium deposits in Mberengwa, Mutoko and some areas around Harare. Zimbabwe is the richest country in Africa in terms of Lithium deposits.
Where will lithium carbonate come from?
North America has only one lithium mine, the Albermarle Silver Peak Mine, and only one US company is currently producing lithium from brine. Most of the world’s lithium comes from brine operations in Chile and a spodumene operation in Australia. China and Argentina are also major lithium producers.
Establishing a reliable, diversified supply of lithium is a top priority for technology companies in the United States and Asia, particularly battery suppliers and vehicle manufacturers, and numerous lithium claims have been leased or staked worldwide.
Brine operations are under development in Argentina, Bolivia, Chile, and the United States; spodumene mining operations are under development in Australia, Canada, China, and Finland; a jadarite mining operation is under development in Serbia; and a lithium clay-mining operation is under development in Mexico.
Zimbabwe is the fifth largest producer of Lithium on the planet (right after Australia, Chile, Argentina and China).
Latest data available (2016) estimates production at the level of 900 metric tonnes (4,791 MT lithium carbonate equivalent).
The Bikita mine is one of the largest lithium mines in Zimbabwe. The mine is located in southern part of the country in Masvingo Province, known for its natural beauty.
The Bikita mine has lithium reserves amounting to 10,8-11 million tonnes of lithium ore grading 1,4 percent lithium and thus resulting in around 0,15 million tonnes of lithium.
