Hi @gassed (and other fellow holders),
Since Lake announced the PFS at end of April, I’ve noticed a few posts that refer to the PFS being based on 22% of the Kachi tenements.The way each poster has commented on this initially made me wonder if it was a simple mistake, however, it has become more apparent that it may be a misunderstanding of the content of the PFS.
I can’t recall the specific phrases used in each of those particular posts, although the most recent of these is one that you posted yesterday evening on a different thread.Your comment in that post was:
“And later comments by management suggest thatthat 4.4million tonnes is based upon only 22% of the entire lease, implyingthat the resource could treble that amount with further drilling.”
The 22%figure does not relate to the entire lease.The LKE lease at Kachi is about 70,000 ha and, whilst the majority of this is within the basin, there are some parts of the lease that appear to be beyond the margins of the basin.You’ll be familiar with the figure below that shows Lake’s land holdings.
The 22%figure instead, relates to the portion of the resource used in thePFS.On 27 Nov 2018, Lake declared a Maiden LCE resource which comprised 1.0 million tonnes in the ‘Indicated’ category, and 3.4 million tonnes in the ‘inferred’ category, giving the defined resource a total of 4.4 million tonnes LCE .The PFS includes the following statement:
A later statement in the PFS reconfirms this.
As such, the PFS was based only on the 1.0 million tonne of the total 4.4 million tonnes of the resource.This is where the 22% figure comes from.
Perhaps the better news from here is that the forward numbers could by significantly higher.Funding is likely to remain a huge issue for some time (unless the company has made substantive headway on this), so I’m still concerned about how this will all develop.
Slightly prior to announcing the maiden resource, on 7 Nov 2018 Lake had announced that they had expanded their lease at Kachi from 50,000 ha to 69,000.With this particular announcement they also declared a Maiden exploration target of 8 to 17 million tonne of LCE.Not that Lake should pursue such an ambitious target at this stage (as this would likely require a sizable amount of hard-to-come-by funds), but it is not hard to see that the resource could be significantly increased relatively easily.
In late October 2018, about a week prior to the announcement regarding the expanded lease, I carried out my own analysis to calculate the potential LCE at Kachi.From the available boreholes and assays, I calculated a weighted average lithium of 212mg/L (the subsequent maiden resource announcement had 211mg/L).I estimated that about 35,000 ha of the total lease area would relate to the basin, and adopted an average depth of 400m and drainable porosity of 10%.From this, my ‘exploration target’ was just under 16 million tonnes LCE.
The development costs that were documented in the PFS were higher than I was expecting, so there is still a long way to go.Given the Capex required to construct the plant (let alone the need for other funds to continue with the pilot plant, DFS, and other exploration works), my current thought are that a partnership would be best.I feel that a simple sale of part of the Kachi asset won’t appeal unless there is a plant already there to produce from.Alternatively sell Cauchari as that seems a little more like a stranded asset. I think there is no point selling Olaroz or Paso (yet) as we just don’t know what we have with those.
The PFS reported Opex of US$4,178/tonne LCE, and that US$1,677 of this related to utilities (electricity, gas, water).Table 3 of the PFS is below and provides a breakdown of the operating costs for the proposed Kachi production plant.
On the cover page of the PFS, Dave Snydacker, the CEO of Lilac Solutions, commented:
From Dave’s comment, I take it that more than half of the US$1,677 figure relates to the use of gas.Whilst it is unlikely that the production plant could be completely powered by solar and would therefore still have some dependency on gas, it would seem reasonable that say two-thirds of the power requirements could be provided by an appropriately sized solar field.
My estimations are:
Say 50% of the utilities cost is from using gas, so $1,677 x 0.5 = US$835/t
If two-third of this can be provided by solar, then saving of $835 x 0.66 = US$551/t
This assumes that there is no Opex associated with running the solar plant itself – which wouldn’t be the case, but for simplicity, I’ll ignore it for this exercise
Let’s round this figure to US$550/t LCE.The resulting Opex then reduces from US$4,178/t to US$3,628/t.I’ve taken a chart from Lake’s post-PFS presentation and plotted where this value would sit.
For a 25,500 tpa plant, a reduction in Opex by US$550/t would result in an annual saving of US$14 million, or US$350 million over the 25 year production period.The cost to construct a solar field and substation would be nowhere near this, so even if my numbers are out by a bit, it seems like a pretty easy place look for savings.
Perhaps the main benefit with exploring these improvements in Opex goes back to the scale of the project that I was referring to earlier in this post.If the Kachi basin has anything near 8 million tonnes LCE (let alone the 17 million tonnes), then the difference in project costs become massive.Remember that the PFS was done on the ‘Indicated’ quantity of 1.0 million tonnes.In my opinion, this aspect (large project scale with an Opex possibly at the very lowest end of the above chart) would be of greatest appeal to a partner.
Regards,
Grasti
(20min delay)