Primero focus, page-97

LYL (Lycopodium) has announced a $35m EPC contract with Liontown. Because LYL has similarity with Primero, the success of LYL demonstrates the strategic advantage of NWH acquiring Primero. Part of LYL's announcement reads. “Having initially undertaken the Pre-feasibility Study (PFS) update for the project, followed by Value Engineering Assessments (VEAs) and subsequently the Definitive Feasibility Study (DFS) and Front End Engineering Design (FEED) services, Lycopodium is very pleased to now have the opportunity to manage the project through the EPCM delivery phase.”

The message is, get in early, make a few dollars on relatively low value contracts, build a good relationship, and be in the box seat for the larger contract a few years later. Also, although the initial contracts are small, they are very profitable, because all they requires is a few skilled engineers substantially working off-site, perhaps from home (Covid or no Covid). That low-CAPEX style business is why LYL can distribute most of its profits as dividends, does not need debt financing, and has never raised capital after the initial $20m float years ago.

On the lithium ain't lithium story, some of the reasons why lithium from spodumene is a better story that lithium from brines (specifically the salars of Chile and Argentina and Bolivia) are as follows:

• It is easier to get very high-purity lithium (99.999+%) from spodumene than brine. I have not been able to find an excellent paper on this topic a few years ago.
• The news media tend not to make a distinction between 99.9+% and 99.99+, and the distinction between lithium carbonate and lithium hydroxide monohydrate. A few years ago that distinction was not important, because both could be used in LiIon batteries. What has changed is the Nickel-Cobalt-Manganese concoction of NCM batteries. Initially the mix was 1:1:1, then 5:3:2, but now it is 6:2:2, with 8:1:1 being the target, and in the latter two, the chemistry requires lithium Hydroxide monohydrate, which is why SQM invested in the JV (Covalent Lithium) with Wesfarmers.
• The lithium triangle (where Argentina, Chile and Bolivia) border each other is very dry, and the locals have become beligerent, because forcing brine to the surface uses water that these geographies lack, so the business has become very political, and hence politically risky.
• It is cheaper to get a spodumene mine up and running in Australia, than it is to open up a new salar for lithium extraction in the lithium triangle, and risk of nationalisation is much lower in Australia
• I am not sure about the economics of mixing geothermal energy production and extracting lithium are, but time will tell. These projects have a long history of successfully generating electricity, so if the lithium side fails, the power plants would survive as viable businesses. Also, if extracting contaminants from the lithium, mainly sodium, is a problem, the lithium still has commercial value, but not in car batteries.