Rodinia Lithium Receives Positive Preliminary Economic Assessment for the Diablillos Lithium Brine Deposit With NPV of Up to US$964 Million and IRR of 36%
Today -
by Marketwire
Rodinia Lithium Inc. ("Rodinia" or the "Company") (TSX VENTURE: RM)(OTCQX: RDNAF)
is pleased to announce the results of the Preliminary Economic Assessment ("PEA") completed on its 100% owned Salar de Diablillos lithium brine project ("Diablillos" or "Salar") located in Salta Province, Argentina. The PEA outlines an operation producing 15,000 tonnes lithium carbonate ("LC") per year and approximately 51,000 tonnes of KCl ("potash") per year, projecting a 34% internal rate of return ("IRR") pre-tax and a US$561 million pre-tax net present value ("NPV") at an 8% discount rate. The PEA also outlines Rodinia's available option to increase production to 25,000 tonnes LC and 85,000 tonnes potash per year. This increased production scenario generates a much higher pre-tax NPV estimate of US$964 million, along with a pre-tax IRR of 36%. Rodinia continues to advance the technical and processing aspects of the Salar and will commence a feasibility study once the PEA report is finalized.
The PEA was completed by SRK Consulting (U.S.) Inc ("SRK") located in Lakewood, Colorado and is effective as of November 1, 2011. The brine resource model and resource estimate were provided to SRK by Paula Larrondo, Principal Geologist, P.Geo., of AMEC Internacional Ingenieria y Construccion Limitada, Santiago, Chile, Qualified Person ("QP") for the Company's NI 43-101 compliant recoverable lithium brine resource estimate. The complete PEA report will be filed on SEDAR and Rodinia's website within 45 days of this news release.
The table below outlines the key findings of the PEA:
Preliminary Economic Assessment Highlights (All currency is US$, pre-tax)
----------------------------------------------------------------------------
15,000 tpa LC 25,000 tpa LC
----------------------------------------------------------------------------
NPV at 8% discount rate (pre-tax) $ 561 million $ 964 million
----------------------------------------------------------------------------
IRR (pre-tax) 34% 36%
----------------------------------------------------------------------------
Total Initial Capital Costs $ 144 million $ 220 million
----------------------------------------------------------------------------
Operating Costs per tonne LC(i) $ 1,519 $ 1,486
----------------------------------------------------------------------------
Operating Costs per tonne LC with
potash and boric acid credits $ (703) $ (762)
----------------------------------------------------------------------------
Operating Costs per tonne KCl(i) $ 170 $ 160
----------------------------------------------------------------------------
Average annual free cash flow(i) $ 89 million $ 150 million
----------------------------------------------------------------------------
Mine life 20+ 20+
----------------------------------------------------------------------------
Annual production rate of potash(i) 51,000 85,000
----------------------------------------------------------------------------
Annual production rate of boric
acid(i) 18,000 31,000
----------------------------------------------------------------------------
Projected commencement of production 2015 2015
----------------------------------------------------------------------------
Years to payback 1.6 years 1.5 years
----------------------------------------------------------------------------
(i) Averaged using years of full production, discounting ramp up period.
The PEA is preliminary in nature, includes inferred brine 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 estimates of the PEA will be realized.
William Randall, President & CEO of Rodinia, commented "This PEA is the product of quality work completed on schedule by Rodinia's expert staff and consultants. The PEA demonstrates that Diablillos has the potential to be a low cost producer of high purity, battery-grade, lithium carbonate, potash and boric acid using conventional, environmentally friendly methods to harvest the salts. Due to the favourable geochemistry of the brines, our potash and boric acid production is such that revenue from the sale of these products will result in credits in excess of US$3,500/tonne of LC, more than covering our total anticipated production costs. As long as prices for potash and boric acid remain at today's levels or higher, Diablillos has the potential to remain price competitive down to historic lows for lithium carbonate pricing."
Financial Sensitivity at Various Discount Rates (US$ millions over 20
years)(i)
----------------------------------------------------------------------------
10,000 tpa 15,000 tpa 20,000 tpa 25,000 tpa
Discount rate\Output LC LC LC LC
----------------------------------------------------------------------------
6% 462 716 971 1,225
----------------------------------------------------------------------------
8% 361 561 764 964
----------------------------------------------------------------------------
10% 283 442 604 765
----------------------------------------------------------------------------
12% 223 350 481 610
----------------------------------------------------------------------------
(i) At an average LC price of US$5,500 per tonne. All figures are pre-tax.
Financial Sensitivity at Various LC Prices (US$ millions over 20 years)(i)
----------------------------------------------------------------------------
Price\Output 10,000 tpa LC 15,000 tpa LC 20,000 tpa LC 25,000 tpa LC
----------------------------------------------------------------------------
US$5,000 322 503 686 868
----------------------------------------------------------------------------
US$5,500 361 561 764 964
----------------------------------------------------------------------------
US$6,000 399 619 841 1,060
----------------------------------------------------------------------------
US$6,500 438 677 918 1,157
----------------------------------------------------------------------------
(i) At an 8% discount. All figures are pre-tax.
The Salar has favourable economic potential across a range of discount rates, annual production rates, and long-term LC prices. In all cases the Salar shows robust economics consisting of large NPV values and significant positive cash flows, which position it favourably relative to other PEA reports issued for salars at a similar stage of development in the Puna region of South America.
Will Randall elaborated on the preliminary economics of the Salar, "We are pleased with the results and initial conclusions of this PEA. While the assessment estimates robust economics with first quartile capital and operating costs, we gained considerable insight to further improve on these already favourable numbers. We will look to validate these opportunities during the Feasibility Study phase, which will commence once the PEA report is finalized."
Economic Parameters and Assumptions
The PEA presents a base case operation producing 15,000 tonnes of battery grade lithium carbonate per annum and 25,000 tonnes of battery grade lithium carbonate in the optional production scenario. First production levels of 9,000 tpa LC (15,000 tpa LC for optional production) are expected to be reached after three years of mine construction and pre-production, with full production levels reached two years later. Allowing a further year for the completion of a Feasibility Study, the PEA contemplates initial production by 2015. Management will begin to evaluate methods in which feasibility level engineering and mine construction can be combined to expedite this production timeline. In particular, management will focus on construction of pilot ponds that will subsequently be employed in the commercial production circuit.
Details and Assumptions
Total initial capital expenditures (including contingency) are estimated at US$144 million to produce 15,000 tpa LC and US$220 million to produce 25,000 tpa LC. The initial capital cost estimate excludes closure costs and sustaining capital. Sustaining capital requirements for years 1 to 20 of operation (15,000 tpa LC) were estimated to be approximately US$80 million including wellfield maintenance and replacement.
-----------------------------------------------------------------------
-----
15,000 tpa LC 25,000 tpa LC
Summary of Estimated Initial Capital Costs (US$ millions) (US$ millions)
----------------------------------------------------------------------------
Wells & Ponds
----------------------------------------------------------------------------
Wellfield 8 11
----------------------------------------------------------------------------
Ponds 57 94
----------------------------------------------------------------------------
Other (wellfield & pond) 11 16
----------------------------------------------------------------------------
Contingency (20%) 15 24
----------------------------------------------------------------------------
LC Crude Plant & Refinery
----------------------------------------------------------------------------
Plants 17 25
----------------------------------------------------------------------------
Other (carbonate plant) 9 12
----------------------------------------------------------------------------
Contingency (20%) 5 7
----------------------------------------------------------------------------
Potash Floatation Plant
----------------------------------------------------------------------------
Plant 19 26
----------------------------------------------------------------------------
Contingency (20%) 4 5
----------------------------------------------------------------------------
TOTAL 144 220
----------------------------------------------------------------------------
Mine construction for a 15,000 tpa LC production facility requires the installation of 23 production wells, approximately 7 square kilometers of evaporation ponds for the production of lithium carbonate, potash and boric acid. At 25,000 tpa LC, the requirements increase to 53 production wells and 11.5 square kilometers. While the wells, evaporation ponds and potash plant are designed to be constructed on the Diablillos property, the current design contemplates constructing the boric acid and lithium carbonate plants off-site at an industrial park in Pocitos. Cost analysis performed on the various options, taking into account capital costs requirements and operating costs, indicated constructing the lithium carbonate and boric acid facilities where access, natural gas, and power are readily available presented considerable cost savings across the board.
A conservative pumping rate of 11 litres per second was employed for this study based on field test work. It is important to note that numerical groundwater flow and solute transport modeling, constraining well drawdown and accounting for dilution impacts on brine chemistry, has demonstrated that higher extraction rates can be achieved from the sand and gravel aquifers predominant at Diablillos. Once further tests are completed on production size wells management expects the estimated capital expenditures required for well construction to be significantly reduced. Pond construction considers an initial unlined pond, where brine is brought to saturation, followed by a series of subsequent lined ponds. There is natural clay occurring on or near Diablillos that will allow for construction of the initial ponds, offering cost savings over lined ponds. Any brine losses experienced in this unlined pond go straight back into the underlying Salar sediments and can be potentially recovered at a later date.
The total average operating costs over 20 years are estimated to be negative at (US$703) per tonne LC once the potash and boric acid credits are applied, based on the following:
-----------------------------------------------------------------------
-----
Summary of Estimated Operating (US$/t
Costs (US$/t LC) (US$/t KCl) Boric Acid)
----------------------------------------------------------------------------
Wells & Ponds (total) 408 46 85
----------------------------------------------------------------------------
Brine transportation 104 12 22
----------------------------------------------------------------------------
Reagents 242 27 51
----------------------------------------------------------------------------
Energy 49 6 10
----------------------------------------------------------------------------
Labour 10 1 2
----------------------------------------------------------------------------
Other 4 0 1
----------------------------------------------------------------------------
LC Crude Plant & Refinery (total) 972 - 203
----------------------------------------------------------------------------
Reagents 791 - 165
----------------------------------------------------------------------------
Energy 136 - 28
----------------------------------------------------------------------------
Labour 37 - 8
----------------------------------------------------------------------------
Other 9 - 2
----------------------------------------------------------------------------
Potash Flotation Plant (total) - 73 -
----------------------------------------------------------------------------
Reagent - 1 -
----------------------------------------------------------------------------
Energy - 64 -
----------------------------------------------------------------------------
Labour - 7 -
----------------------------------------------------------------------------
Other - 1 -
----------------------------------------------------------------------------
G&A 82 9 17
----------------------------------------------------------------------------
Transport 56 42 42
----------------------------------------------------------------------------
TOTAL 1,519 170 348
----------------------------------------------------------------------------
TOTAL LC w/ credits & royalty
deductions (703)
----------------------------------------------------------------------------
Well and pond costs as well as G&A costs were assigned to all three products according to the percentage of revenue generated by each commodity. Potash plant costs were assigned exclusively to potash and LC plant costs were distributed between lithium carbonate and boric acid, as both of these are produced in the same plant complex. By far the largest expense is the cost of reagents, and in particular soda ash and lime, followed by transportation costs.
Consistent with practice in the industry, this PEA has been prepared with an engineering accuracy of +/- 30%. As the project progresses through the feasibility stage, advancement in the detail of engineering will improve the accuracy to approximately +/-15%. The PEA used commodity pricing provided by Rodinia that was assembled from various studies and sources, including industry leading reports and forecasts provided to the Company through its relationship with Forbes & Manhattan Inc., access to industry specialists (boric acid), and generally accepted industry standard pricing based on recently completed studies similar in nature to this PEA. The PEA assumed long-term commodity prices of US$5,500 per tonne LC, US$620 per tonne potash, and US$1,150 per tonne boric acid.
PEA Report
The PEA was prepared in accordance with the guidelines of National Instrument 43-101 by the independent engineering firm SRK Consulting Limited with contributions from AMEC Internacional y Construccion Limitada ("AMEC") of Santiago, Chile, and Mr. Robert Cinq-Mars of North Carolina, USA (whose work experience includes 20 years with FMC Lithium Division as Manager, New Resources and Process Development). SRK is a leading full-service engineering and consulting firm. The final PEA technical report will be filed on SEDAR within 45 days.
Description of Proposed Operation
The proposed operation for Diablillos will largely make use of conventional evaporation based processing, similar to those employed at Silver Peak (Nevada, USA) and Atacama (Chile). The brine is to be pumped from subterranean aquifers by a series of production wells to an initial unlined evaporation pond. The proposed lithium recovery process is a combination of solar evaporation steps, in-field brine treatment, by product potash ("KCl") and boric acid recovery and chemical processing to produce lithium carbonate. The process results in a high lithium recovery of approximately 65%. The process contemplates a series of six ponds from largest to smallest, where the largest is used to bring brine to saturation and is designed to be unlined reducing the capital cost of pond construction. Sylvinite is to be harvested from the third pond, which is proposed to be subsequently upgraded through a conventional floatation process to muriate of potash. Brine extracted from the final pond will have a concentration of approximately 12% lithium chloride and will be transported to the treatment facility in Pocitos, where boric acid and lithium carbonate are produced. For further details please refer to the press release dated October 11, 2011.
Groundwater and Solute Transport Modeling
SRK evaluated potential brine extraction for Diablillos to produce lithium carbonate, potash and boric acid. This modeling was based on the resource estimate conducted previously by AMEC (please refer to the press release dated April 11, 2011), and on work completed more recently by Rodinia and SRK; in particular the completion of pumping tests and additional drilling. The work was completed based on the development of 3-D numerical groundwater and solute transport models and included the assessment of:
-- The number of extraction wells needed to meet production targets, their
locations, total pumping rates and the subsequent drawdown in
surrounding areas
-- Expected changes in lithium, potassium and boron concentrations within
the extracted brine over time given possible surface water dilution and
dilution from surrounding areas containing lower concentrations of these
components
SRK completed the numerical modeling using MODFLOW-2005 (groundwater flow) and MT3DMS (solute transport) finite-difference codes that are supported by Visual MODFLOW software (SWS, 2010).
Analyst and Shareholder Conference Call
Rodinia will host a conference call at 8:30 AM Eastern Standard Time on Tuesday, November 8, 2011 to discuss the PEA results. To participate in the call please dial the following:
International: +1 (416) 340-2217
Toll Free North America: 1-866-696-5910
Participant Code: 4326413
To register and listen to the webcast of the call, please go to Rodinia's website at www.rodinialithium.com.
Qualified Person
The PEA was prepared under the supervision of Mr. Terry H. Braun, with SRK. Mr. Braun relied on the independent QP contributions of Ms. Paula Larrondo (brine resource), Mr. Bob Cinq-Mars (process design) and Dr. Vladimir Ugorets (brine extraction modeling). Mr. Braun is an independent Qualified Person as defined by NI 43-101 and Mr. Braun is independent of Rodinia. Mr. Braun has reviewed and is responsible for the technical information contained in this news release.
About Rodinia Lithium Inc.:
Rodinia Lithium Inc. is a Canadian mineral exploration and development company with a primary focus on Lithium exploration and development in North and South America. The Company is also actively exploring the commercialization of a significant Potash co-product that is expected to be recoverable through the lithium harvesting process.
Rodinia's Salar de Diablillos lithium-brine project in Salta, Argentina, contains a recoverable resource of 2.82 million tonnes lithium carbonate equivalent and 11.27 million tonnes potassium chloride equivalent. The project contains a recoverable inferred resource of 952,553,000 m3 grading 556 mg/L lithium and 6,206 mg/L potassium. Throughout 2011, Rodinia will focus on continuing to develop the Diablillos project by completing additional drilling and advancing through scoping study.
The Company also holds 100% mineral rights to approximately 70,000 acres in Nevada's lithium-rich Clayton Valley in Esmeralda County, and is currently in the process of assessing the size, quality and processing alternatives of this deposit. The Clayton Valley project is located in the only known lithium-brine bearing salt lake in North America, and looks to represent the only new source for domestic lithium carbonate supply.
The Projects are supervised by Ray Spanjers, Rodinia's Manager of Exploration. Mr. Spanjers is considered a Qualified Person, as defined by National Instrument 43-101.
Please visit the Company's web site at www.rodinialithium.com or write us at info@rodinialithium.com.
Cautionary Notes
Except for statements of historical fact contained herein, the information in this press release constitutes "forward-looking information" within the meaning of Canadian securities law. Such forward-looking information may be identified by words such as "plans", "proposes", "estimates", "intends", "expects", "believes", "may", "will" and include without limitation, statements regarding the impact of the drill program at the Diablillos property and results of such drill program; the potential of the Diablillos property; anticipated timing with respect to the completion of a preliminary economic assessment, the potential results and timetable for further exploration with respect to the Clayton Valley project and the Diablillos property, the timetable with respect to future acquisitions and exploration developments at Clayton Valley and Diablillos, timetable for further exploration, analysis and development, title disputes or claims; and governmental approvals and regulation. There can be no assurance that such statements will prove to be accurate; actual results and future events could differ materially from such statements. Factors that could cause actual results to differ materially include, among others, metal prices, competition, financing risks, acquisition risks, risks inherent in the mining industry, and regulatory risks. Most of these factors are outside the control of the Company. Investors are cautioned not to put undue reliance on forward-looking information. Except as otherwise required by applicable securities statutes or regulation, the Company expressly disclaims any intent or obligation to update publicly forward-looking information, whether as a result of new information, future events or otherwise.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
Contacts:
Investor Cubed Inc.
Investor Relations
+1 (647) 258-3311
Rodinia Lithium Inc.
Aaron Wolfe
Vice-President, Corporate Development
+1 (416) 309-2696
info@rodinialithium.com
www.rodinialithium.com
SOURCE: Rodinia Lithium Inc.
mailto:info@rodinialithium.com
http://www.rodinialithium.com
