After making some more analysis and research about LTR's PFS and lithium industry here I have made some conclusions which support my previous analysis.
NO NEED TO HAVE A CRYSTAL BALL
LTR releases all data and predictions for us to understand where are headed to!The page 11 of PFS presentation was giving great hints about what is happening and will happen. You don't need a crystal ball to understand what will happen. Actually LTR management has given all data and predictions on their presentations but most people here are only reading the downrampers' silly posts and getting frustrated.
The PFS work we have seen is only a top of iceberg kind of thing. It's got a lots of data at the background. The PFS we have seen is only a brief part of the big job.
They spent a lot of time and effort on the details of PFS. They spent over $1m only on mineralogy work to get the things right. They don't want to leave any uncovered and undone work behind. They want everything perfect.
"...maximising future opportunities"What is the future opportunity?
Could it be selling the resource at the premium price?
Or, making a JV at the best conditions for LTR shareholders?
Outcome is the the same, whether it was sold or JVed, all roads leads to our bank accounts.
The PFS work has been done for 70mt resource and for 50mt reserve.
The ore process per year is for 2mt in PFS.
The best part of it is very low CAPEX; AU$ 240m including AU$31 contingency.
Other best part is metallurgical test work which confirms
the ability to produce a +6% Li2O spodumene concentrate with an estimated recovery of 76%. This is great.
Post-tax NPV (8% real) of A$507M and IRR of 25%. Again this is post tax and it's great.
KDR's IRR was 26.6% for integrated PFS (mine concentrate plus chemical refinery plants). When LTR makes its IPFS the IRR will increase a lot as the profit of chemical plant should be higher.
DFS work has already been started. DFS may change the things dramatically.
First thing is first! The resource size;
See the large open pit. 70mt @ 1.3% MRE (mineral resource estimate) (plus 5mt for U/G) was calculated only inside that pit. (small one is not that important for MRE). And now
see the red mineralised pegmatite system, and compare its size with the open pit. If there is 70mt in that open pit area how much would be there be in the red zone your reckon? I am thinking it won't be any less than another 75mt which brings the whole resource size to 150mt.
Drilling at KV project is intense atm, it's continuing with three rigs and the fourth rig will arrive next month.
The total resource size after finishing the drilling in next 3-4 months can reach to 150mt. Some part of this will be U/G. We already have 70mt for open pit resource and it might be around 100mt-120mt at the end. We have 5mt of U/G resource in the current 75mt resource. it might go up to 40mt-50mt at the end (conservatively speaking)
What LTR is doing now is to prove more resources for open pit and shallower mining by drilling more at NW section which has already extended 400m more towards NW. It's still open to NW and NE (my A1 zone). LTR has interesected very high grade pegmatites (including 12m @3.1% Li2O) at this area. That will reduce the strip ratio of open pit significantly IMO.
The other important step is to prove more and very high grade resources at feeder zone. This part will be included as underground mining resources in the DFS.
This was what they said on PFS anns; "
Future integration of a potential underground operation to expand annual production and bring forward higher grade material from an expanded Mineral Resource""Integration of U/G operation"...As far as I understand
LTR might make a scoping study for the U/G resource after finishing drilling in next 3-4 months, long before making DFS. Then we could have a good idea about the size and processing cost of U/G resources.
"Concurrently Develop Underground Mine"
That means the U/G resource will be mined independently from the open pit operation and feed the ore to the concentrate plant concurrently . While the open pit is being digged down, they will reach to the feeder zone by a 500m depth decline (which is quite cheap to build) from the surface (not related to open pit)
By that way the process ore amount can be increased to 4mt in DFS (it can be seen in scoping study if it is done) from 2mt in PFS.
The LOM (Life of Mine) can remain the same; 26 years but the ore process and spodumene concentrate production could be doubled, respectively from from 2mt to 4mt and from 295kt to ~600kt. The part shown below will be U/G mining operation. The open pit will be extended towards NW and will cover the small pit.
As far as I can see on the page 11 of preso they have already started the work on U/G mining study. I can see thedecline and the frames of operation on the graphic below.
Cost of ore mining from U/G operation vs Open Pit operation;The ave. LOM cost of mining ore from
open pit in PFS is AU$ 35 per tonne.
The ave. cost of U/G mining per tonne can be ~AU30 higher than open pit (opinion of industry experts) which could bring the cost to AU$65.
"Bring forward higher grade"
In the first years of mine the U/G operation will provide high grade ore (~1.6% Li2O) to the concentrate plant. The higher cost of U/G operation will not make big difference in the IRR, instead it will increase the percentage of IRR imo because its very low strip ratio will decrease the negative effect of high strip ratio of open pit operation.
Also the less waste will be dumped and much lower environmental footprint will be created.
Additional revenue from recovery of tantalum not included in PFS however it will be determined as part of the DFS. Preliminary testwork shows good potential to recover a saleable product. That will reduce cost of the concentrate around 5% and will increase IRR ratio.
Exclusion of tantalum credits from PFS tells me that they are not desperate to reduce the metrics of PFS. That get me think that they are happy with the PFS results and/or also they think their prospective buyers will be happy with the results.
INTEGRATION OF CHEMICAL (Lithium hydroxide) PLANT TO CONCENTRATE PLANT IN DFSFirst of all the "integration is not the right term in terms of a complexity. The spod concentrate will be shipped to the chemical plant by road, railway or ship. That's not the integration of course. The main integration factor is the spod concentrate sent from the mine plant should be in the same specs (especially in terms of impurities) all the time. The chemical plant will be fine tuned for that type of feedstock ore and will work constantly and efficiently without shut-downs caused by feeding the different spec ores.
The feasibility and design. construction and commissioning of a chemical plant is nothing like a concentrate plant. That would be easy and straightforward. Calculating the cost of a chemical plant would be very easy. It's feedstock is well know SC6 which has certain industry standards (mainly 6% spod and max. 0.8% iron content). The concentrate plant has to send the right SC6 product to the chemical plant. Output is also in standards; lithium hydroxide.
The machines and other plant elements are quite standard for producing the lithium hydroxide. You only need to find out the location related issues (land, power, water, etc issues. If you will do it in a place well known for that type operations like Kwinana, the estimations would be be quite easy.
However a mine and concentrate plant needs a very comprehensive PFS and then DFS if it's needed. Because there are many factors affecting the output cost; grade, strip ratio, pit design, location. power, water, recruitment, etc.
INTERESTED PARTIES AND "PROSPECTIVE CUSTOMERS"We all know Tim Goyder mentioned "Prospective customers" on his letter to AGM. The meaning of "prospective" is clear. "Customer" means "buyer" to me. He didn't mention "prospective partners".
We also know that 5 NDAs was signed long time ago however a lots of factors have changed since then. The key things is TG does not want to sell his shares if the market is not ready pay the premium for it.The most important factor is the resource size. Because the resource is getting bigger over the time, the interested parties are now looking like a pyramid; the little number of Tier-1 group (majors) at the top and others (Tier-2 and Tier-3 groups) are making the widening parts of the pyramid.
Who could they be?
As I said before
that Wesfarmers is my favourite "prospective buyer". Some strategic factors tell me that Wesfarmers is now the number 1 prospective buyer.Wesfarmers has to buy KV resource otherwise Wesfarmers would be a small player in lithium business. It s clear and obvious that there is no other advanced Tier-1 lithium project other than KV project for them to buy. And there will be nothing for the next 5 years when the lithium deficit is going to be quite high.
I posted these issues on my post#:40964719on Oct. 19 2019IMO, the Tier-1 lithium producing majors will be Albemarle, Tianqi, SQM and Wesfarmers. They will all have integrated (concentrate + chemical) operations in Australia.
Other producers like Pilbara Minerals. Ganfeng, Livent, Mineral Resources (MIN) will not be able to get any closer to those Tier-1 group. Only MIN will be sharing 40% of Wodgina and chemical plant with Albemarle.
Wesfarmers has relatively a small resources in comparison to its rivals. Only 95mt of Earl Grey deposit.
However Wesfarmers is much bigger than all its rivals in market capitalisation, it has a very strong competency and experience in chemical business, a strong chemical business presence in WA, and it has spare $1.5b to invest in battery minerals business. That money was spared from Lynas takeover attempt. The money $765m paid KDR was a separate fund than $1.5b.
Wesfarmers would never think to involve in nickel and cobalt mining. That money nowhere to go other than buying a Tier-1 lithium deposit.
It is obvious to me that Wesfarmers won't be satisfied with 95mt resource of Earl Grey and partnership with SQM. They will go all the way to the bottom of it IMO.
Wesfarmers bought KDR with its 3 offtake agreements. None of them was with a Chinese company. A binding agreement with Tesla, and two non binding agreements with LG Chem (Korea) and Mitsui (Japan).
That tells me if LTR would sign off-take agreements with Tier-1 non-chinese battery maker companies and if they are negotiating with Wesfarmers at the same time, Wesfarmers might happily accept them.
I wouldn't be surprised if LTR makes a offtake-agreements with Japanese, Korean, Tesla, and European battery makers soon despite they are promoting being uncommitted and unencumbered lithium developer. In that case those agreements would be signed by the approval of "prospective customer" and I would think that "prospective customer" couldn't be anyone else other than Wesfarmers.
Time will tell the truth.
(20min delay)