Savannah Resources plc (LON:SAV), the AIM quoted resource development company, has today announced the results of its Scoping Study undertaken on the Company’s 75% owned Mina do Barroso Lithium Project, located in northern Portugal (Figure 1).
To view the press release with the illustrative maps and diagrams please use the following link:
http://www.rns-pdf.londonstockexchange.com/rns/3422R_1-2018-6-13.pdf
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KEY FINDINGS OF SCOPING STUDY (ON 100% PROJECT BASIS)
· Confirms that Mina do Barroso has the potential to be a major European producer of spodumene lithium · Demonstrates robust project economics with the potential to deliver substantial shareholder value · Project considered to be of low technical risk with open pit mining and conventional processing combining Dense Media Separation (‘DMS’) and flotation circuit to produce a spodumene concentrate for export sale · Excellent base case pre-tax NPV8 of US$356m and IRR of 63% · Strong outcomes based on a Mining inventory of 14.42Mt at 1.07% Li₂O and average annual run-of-mine production of 1.3Mtpa, over 11 years · Average annual production of ~175,000tpa of spodumene concentrate at 6% Li₂O · Life of Mine (‘LOM’) EBITDA of US$805m with payback period of 1.7 years · Average EBITDA of US$72m per annum · LOM revenue of US$1,555m · Strip ratio of 1.6:1 (waste to ore) for first four years, 5.2:1 for LOM · Average LOM C1 Cash Operating Cost of US$271 per tonne of concentrate (CIF China) · Initial CAPEX of US$109m (including feldspar and quartz circuit, and excluding contingencies) · Solid basis to fast track the Project towards a Feasibility Study · Fast tracked development could see the Project producing concentrate in Q1 2020
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Opportunities for Growth and Optimisation
· Current scenario is considered as a base case, with significant opportunity to expand and improve the Project through further Mineral Resource increases and further project definition and optimisations
· Expansion of the current Mineral Resource base is likely to provide a significant opportunity to expand mine life and potentially increase annual processing rates
· Expanding the site footprint will potentially improve infrastructure options and reduce mining and infrastructure costs
· Replacing higher strip ratio ore in the later years of the current mining schedule to reduce average mining costs and footprint of any potential development
· Review and optimisation of the Project’s CAPEX requirement
· Metallurgical optimisation to potentially increase spodumene recovery rates from 80%
Savannah’s CEO, David Archer said: “The Scoping Study highlights the robust features and outstanding investment appeal of the Mina do Barroso Lithium Project with a very high-IRR and strong cash generation, even with a conservative spodumene prices. This is matched by an attractive initial CAPEX estimate of US$109m, which includes the circuit for feldspar and quartz. The Project’s cash costs put it at the lower end of the spodumene lithium cost curve. We believe these results show that we are on track to become a low-cost producer of quality spodumene lithium concentrate by early-2020.
“There is exponential growth across the lithium supply chain as the industry gears up for transformational change to meet demand from the automotive and energy storage sectors, with Bloomberg New Energy Finance recently reporting that the transport sector is fast becoming the main driver of demand for lithium-ion batteries, overtaking consumer electronics for the first time this year. This is a great time to be bringing a new lithium mine into development.
“Since acquiring the Project just over a year ago we have achieved an enormous amount, having delivered not only a maiden Mineral Resource Estimate but two major Mineral Resource Estimate upgrades with the current estimate at 14Mt at 1.1% Li₂O, and now, a Scoping Study. We are committed to maintaining this pace as we continue to fast-track towards production, and believe significant further upside exists, with excellent potential to increase the Mineral Resource Estimate and the mining rate, schedule lower strip ratio ores in the latter years of the Project and optimise site operational features to further lower the cost of production and increase the value of the Project.
“Mina do Barroso is developing fast and it is clear that it will be a key feature in the up-stream part of the European lithium value chain and will help to drive European lithium independence.”
A video of the Company’s Mina do Barroso Lithium Project is now available on the Company’s website at www.savannahresources.com.
Figure 1. Mina do Barroso Project Summary Map (source: Company information)- see PDF
Executive Summary
The Mina do Barroso Lithium Project is located in northern Portugal near the town of Boticas and around 145km by road from the deep-water port of Leixões near the city of Porto. The object of the Scoping Study was to produce a preliminary base case development centred on the defined Mineral Resource Estimate of 14Mt at 1.1% Li₂O, using conventional processes to produce a marketable Li₂O concentrate to demonstrate the potential economics of the Project. Material assumptions and key metrics for the Study are presented in Table 1.
Table 1. Material assumptions and key metrics (100% Project Basis)
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Outcome: |
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Parameter |
Unit |
Base Case |
Upside Case |
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Initial CAPEX (excluding contingencies) |
US$ M |
109 |
109 |
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Average LOM C1 Cash Operating Cost** |
US$/t conc |
271 |
274 |
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Average Years 1-4, C1 Cash Operating Cost** |
US$/t conc |
210 |
212 |
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LOM Revenue |
US$ M |
1,555 |
1,783 |
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LOM Operation Expenditure |
US$ M |
553 |
553 |
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LOM EBITDA |
US$ M |
805 |
1,019 |
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Annual EBITDA |
US$ M |
72 |
91 |
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Pre-Tax NPV8 |
US$ M |
356 |
474 |
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Pre-Tax IRR |
% |
63.2 |
68.2 |
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Pre-Tax Payback Period |
Years |
1.7 |
1.7 |
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Post-Tax NPV8 |
US$ M |
241 |
321 |
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Post-Tax IRR |
% |
48.6 |
53.2 |
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Post-Tax Payback Period |
Years |
2.1 |
2.1 |
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Input: |
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Parameter |
Unit |
Base Case |
Upside Case |
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Proposed Start of Construction |
Date |
Q2 2019 |
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Duration of Construction |
Months |
9 – 10 |
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Start of Production |
Date |
Q1 2020 |
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Potential Mine Life |
Years |
~11yrs |
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Target LOM Ore Mined: |
Mt |
14.42 |
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Indicated Resources |
% |
50 |
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Inferred Resources |
% |
38 |
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Exploration Target * |
% |
12 |
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Annual Ore Throughput |
Mtpa |
1.3 |
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Average LOM Strip ratio (waste to plant feed) |
w:o |
5.2:1 |
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Average Years 1-4 Strip ratio (waste to plant feed) |
w:o |
1.6:1 |
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Average Feed Grade |
% Li2O |
1.07 (1.02 diluted) |
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Plant Li₂O Recovery |
% |
80 |
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Potential Annual 6% Spodumene Production |
tpa |
~175,000 |
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Feldspar Production |
tpa |
~276,000 |
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Quartz Production |
tpa |
~173,000 |
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Low Grade Bulk Pegmatite (LOM) |
Mt |
2.7 |
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Government Royalty rate (lithium concentrate) |
% |
3 |
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Average LOM Feldspar Price |
US$/t |
39 |
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Average LOM Quartz Price |
US$/t |
33 |
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Average LOM 6% Spodumene Concentrate Price |
US$/t |
685 |
800 |
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*Cautionary Statement: The potential quantity and grade of the Exploration Targets is conceptual in nature, there has been insufficient exploration work to estimate a mineral resource and it is uncertain if further exploration will result in defining a mineral resource. As such, potential investors should not rely upon this Exploration Target as indicative of a mineral resource and should not base their investment decision, in whole or in part, on such Exploration Target.
** C1 Cash Operating Costs include all mining, processing, transport, shipping/freight, corporate, administration, marketing and royalty costs, and are net of by-product credits.
The Mina do Barroso Scoping Study is based on a mine and concentrator only development (Figure 2)for the production of spodumene concentrate for sale to the export market, as well as investigating the sale of low-grade pegmatite material and the production of quartz and feldspar co-products, which offer additional revenue potential. The Project will use contractor mining and fleet. In addition, the Project has been designed to address its sustainability and environmental features which have been optimised by recovering co-products from the feed and by dry stacking tailings, eliminating the need for a tailings dam and reducing the overall footprint of the operation.
Figure 2. Mina Do Barroso Lithium Project Conceptual Mining Site Layout (source: Company information) – see PDF
The Scoping Study developed flowsheet options for a combined DMS and flotation circuit for the recovery of spodumene with tails thickening and dry stack (Figure 3). Low-grade pegmatite material that did not form part of the concentrator feed was quantified so that the opportunity of selling this material can be evaluated. The opportunity of producing both quartz and feldspar co-products from the tailings for the local ceramics industry was also investigated.
Figure 3. Simplified Concentrator Flowsheet (source: Company information) – see PDF
The Project’s NPV was calculated on a 100% project basis, discounted at 8%, and has been estimated via cash flow modelling. The deterministic sensitivity analysis of the Base Case NPV estimates have been calculated on a range of -20% to +35%. These estimates accommodate fundamental uncertainties at the scoping level of study and will be refined through feasibility level studies. The sensitivity analysis was undertaken on all of the key inputs to arrive at a range of project NPV’s for any given sensitivity (concentrate price, initial CAPEX, operation expenditure, and processing concentrate recovery rates). The sensitivity analysis is included in the Sensitivities section in Appendix 1. The NPV is most sensitive to concentrate price and recovery rates. The NPV is less sensitive to initial CAPEX and operation expenditure.
An analysis of the requirements to fast track the Project into production was also conducted and concluded that the Project could be potentially brought into production in Q1 2020. A summary of the proposed time line is provided in Figure 4.
Figure 4. High level Project Execution Plan – See PDF
An analysis of publicly available information indicates that the proposed Mina do Barroso operation will be at the lower end of the spodumene lithium cash costs curve based on published C1 cash operating costs (Figure 5) indicating that the Project is very competitive on a global basis when compared to other similar projects*.
Figure 5. C1 Cash operating costs of lithium pegmatite projects (source: publicly available information) – See PDF
*Reasonable care has been exercised in this comparison, but it is noted that there may be minor differences on the inclusion of certain costs by peers, in particular Savannah has included royalty costs but some peers may not have done.
The current scenario is considered as base case model, with significant opportunity to expand and improve the Project through further resource expansions, project definition and optimisations:
· Expansion of the resource base (Table 2) is likely to provide significant opportunity to expand mine life and potentially increase annual mining and processing rates. The current combined Mineral Resource Estimate and Exploration Target of 22-26Mt at 1.0% to 1.2%Li₂O suggests that there is significant potential to further expand the resource base and improve the overall financial case for the Project
Table 2. Combined Resource Estimate and Exploration Target for the Mina do Barroso Project
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Mineral Resource Estimate and Exploration Target for Mina do Barroso |
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Deposit |
Tonnes (Mt) |
Li2O% |
Li2O Tonnes |
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Grandao |
10.3 |
1.1 |
111,600 |
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Reservatorio |
3.2 |
1.0 |
32,000 |
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Noa |
0.5 |
1.2 |
5,600 |
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Total Inferred Mineral Resources |
14.0 |
1.1 |
149,200 |
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Exploration Target * |
8-12 |
1.0-1.2 |
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Total Current Project Target |
22-26 |
1.0-1.2 |
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*Cautionary Statement: The potential quantity and grade of the Exploration Targets is conceptual in nature, there has been insufficient exploration work to estimate a mineral resource and it is uncertain if further exploration will result in defining a mineral resource. As such, potential investors should not rely upon this Exploration Target as indicative of a mineral resource and should not base their investment decision, in whole or in part, on such Exploration Target.
· The Mina do Barroso Project site is quite hilly, which presents some logistical challenges for the Project. Securing further land and expansion of the current Mining Lease to enable the re-design of the proposed site footprint would provide a significant opportunity to improve infrastructure options and hence reducing mining and infrastructure costs for the Project.
· The last four years of the current mining schedule utilises high-strip ratio ore and a key focus will be to replace this in the schedule with more near surface, low-strip ratio ore which is likely to significantly reduce the overall mining costs incurred in these years and the overall footprint of any potential development.
Competent Persons
The information in this announcement that relates to exploration results is based upon information compiled by Mr Dale Ferguson, Technical Director of Savannah Resources Limited. Mr Ferguson is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM) and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (JORC Code). Mr Ferguson consents to the inclusion in the report of the matters based upon the information in the form and context in which it appears.
The Information in this report that relates to Mineral Resources is based on information compiled by Mr Paul Payne, a Competent Person who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Payne is a full-time employee of Payne Geological Services. Mr Payne has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Payne consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
The scoping level mining assessment of the Mino Do Barroso Deposit has been completed by Mr Nigel Spicer who is a Member of the Australasian Institute of Mining and Metallurgy and Chartered Engineer (IOM3). Mr. Spicer has sufficient experience relevant to the styles of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Spicer is the principal of Minesure Pty Ltd and is a consultant to Savannah Resources Plc and consents to the inclusion in the presentation of the matters based on his information in the form and context in which it appears.
It should be noted that as the Mining assessment has been conducted at a scoping level no Ore Reserves are being reported for the Mina do Barroso Deposit.
