After defining the world's third largest lithium brine resource, Lithium Americas Corp. (TSE:LAC) has now proven the vast economic potential of its Cauchari project in Argentina, announcing Monday the results of a preliminary economic assessment (PEA) on the deposit.
The study, conducted by engineering firm ARA WorleyParsons, was based on a two-phase design plan for a 40,000 tonne per year lithium carbonate facility, and indicated an after-tax internal rate of return as high as 26%, with cash operating costs of just $1,434 per tonne.
Construction for the first 20,000 tonne-per-year phase is expected to begin in 2012, with the remainder of work set to start in 2016.
The report estimated an after-tax net present value, at an 8% discount rate, of $715 million, based on a long-term lithium carbonate price of $5,500 per tone. Total capital costs for both phases of the project are expected to be $399 million.
"The results of this independent report highlight that our lithium project has the potential to become one of the lowest cost lithium operations in the world," said president and CEO Waldo Perez.
"Having already defined the world's third largest lithium brine resource, we are now looking forward to developing a long-life, low-cost operation, in an industry with a significant expected increase in demand over the foreseeable future."
Indeed, lithium carbonate, a chemical compound of lithium, carbon, and oxygen, is used for the manufacturing of lithium-ion batteries, which are increasingly in high demand due to their use in a wide range of portable consumer electronic devices, from mobiles to iPads.
Depending on the design and chemical compounds used, lithium-ion batteries can produce over twice the voltage of an ordinary zinc-carbon or alkaline battery.
Therefore, owning a low-cost lithium brine operation will have a colossal score of benefits. The company's Cauchari project has a lithium brine resource with a low magnesium content, reducing the cost requirements associated with the chemicals used in the production process. In addition, power in the proposed production plant can be produced from natural gas - accessed from a pipeline located just 50 kilometres north of the site.
The base case scenario also assumes the production of just lithium carbonate, even though potash and boric acid are expected to be by-products of the lithium brine production process, potentially adding substantial value to the project.
Lithium Americas' Cauchari project was defined in December as the third largest lithium brine resource in the world, with 5.3 million tonnes of measured and indicated lithium carbonate resources, plus an additional 2.7 million tonnes of inferred resources.
According to the PEA report, given the huge size of the resource, the project is expected to have a long 40-year mine life, which at 40,000 tonnes per year of lithium carbonate, would result in the depletion of only 50% of the measured and indicated resource.
The Cauchari deposit will produce the valuable resource by extracting brine through production wells, after which the brine will then be pumped into large solar evaporation ponds. The study estimates that 80 brine production wells are required to produce 40,000 tonnes per year.
Lithium Americas plans to construct a lithium carbonate pilot production facility as the next step in the development of the project. The company said it expects to begin generating revenue from the first phase of production in 2014.
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