Anson Resources stage one PEA update for Paradox Brine Project identifies further improvements

The ASX-lister is well on its way to developing a world-class lithium brine project right on Tesla’s doorstep as it updates a key economic study on the flagship Paradox Basin asset in Utah.

Anson Resources Ltd (ASX:ASN) has delivered an updated preliminary economic assessment (PEA) for stage one of the Paradox Brine Project in Utah, USA.

The PEA, which is equivalent to a JORC scoping study, evaluates the economics, resources and funding requirements of a producing lithium and bromine asset that could support the burgeoning electric vehicle market in the US.

One of the key wins is inherent in the asset’s reduced sodium bromide operating cost estimates, which decreased 67% to US$377 per tonne with no adjustment to the compound’s sales price.

On the other hand, the cash cost for the production of lithium has reduced by 47% to US$2,431 per tonne, while the PEA’s forecast sales price has risen to US$15,000 per tonne.

In addition, an environmental, social and governance review of the project identified areas for improvement, with this included in the updated PEA.

These changes have contributed to a 14.7% increase in capital cost estimates to US$203 million.

Key considerations

Anson prepared its updated PEA based on annual production forecasts totalling 15,000 tonnes of sodium bromide and 2,674 tonnes of lithium carbonate.

While the ASX-lister aims to generate revenue primarily through sodium bromide sales, Anson believes it can also sell by-products, such as 11,000 tonnes of caustic soda and nearly 3,000 tonnes of boric acid.

At this stage, additional by-product revenue from iodine and other sources remains to be realised.

The project’s key financials are summarised below:

Mineral resource estimate

In addition to outlining an update on Paradox’s economics, Anson’s updated PEA describes the project’s mineral resource.

In particular, a proposed 20-year production runway is supported by Paradox’ indicated lithium and bromide resources.

From there, the bromine extracted will be processed into sodium bromide, while the lithium will be processed to generate lithium carbonate.

The asset’s indicated and inferred resources are defined over a large exploration target that spans four clastic zones at the Utah asset.

Production proposals

To bring Paradox into the next stage of development, the updated PEA considers installing a 15,000-tonnes-per-annum sodium bromide plant and 2,674-tonnes-per-annum lithium carbonate equivalent production facility.

Essentially, the sodium bromide plant would include including all the necessary equipment to produce an end product, along with primary reagents like chlorine, hydrogen and hydrochloric acid.

Capital costs associated with the plant’s construction and engineering are estimated at roughly US$148 million, while the lithium facility could cost US$55 million to bring online.

When it comes to annual operational costs, the facility could require:

• Raw materials — $11.4 million per year;
• Utilities — $6.9 million per year;
• Operating and labour — $5.9 million per year;
• Spent brine disposal — $2.7 million per year;
• Maintenance parts and supplies — $2.3 million per year;
• Contingency (15%) — $2.8 million per year.

Bromine pricing

The global bromine market was valued at US$3.3 billion in 2019 and is projected to grow at a compound annual growth rate (CAGR) of 5.8% to reach US$4.4 billion by 2024.

Crucially, the demand for bromine was not impacted by COVID-19 and the forecast CAGR of 5.8% remains unchanged, according to Markets and Markets, while additional market research indicates a further increase to USD6.6 billion in 2027.

In terms of volume, approximately 740 kilotons of bromine were produced in 2019 and is expected to rise to an estimated 880 kilotons in 2024.

The element’s pricing has steadily increased 4.5% through 2019 to an average price of US$5,050 per tonne.

At the end of the day, actual prices for bromine and bromine derivatives are negotiated on long-term and short-term contracts between buyers and sellers.

Considering this, the PEA has utilised the forward sales price of US$5,280 per tonne over all years of production, while operating costs stand at US$377 per tonne.

As a result, Anson is confident it can achieve the above bromine prices as a result of previous successful test work, which resulted in 90% bromine recoveries.

Lithium pricing

Meanwhile, lithium pricing has been propelled through successive multi-year highs by strong demand from the lithium-ion battery industry set against a backdrop of uncertainty over future supply.

This, in turn, attracted significant attention to the lithium sector and incentivised investment into both mining and processing capacity.

Prices for all lithium products subsequently fell as production at operations in China, Australia, Canada and Chile ramped up as a swath of greenfield projects mitigated fears of future supply shortages.

Average annual lithium carbonate prices in 2016 came in at US$8,650 per tonne, while pricing peaked in November 2017 at US$25,800 per tonne. At the start of 2020, tonnes were priced at US$8,750.

Overall, lithium carbonate is expected to grow at a CAGR of 2% and reach US$13,000 by 2025.

The PEA has utilised the forward price of US$15,000/t over all years of production, with commercial production expected in year five.

This is considered a conservative estimate given the expected growth in the market, driven, among other things, by increased demand for lithium-ion batteries.

As with its bromine production, Anson is confident it can achieve the price target as a result of having produced a bulk sample of battery-grade 99.9% lithium carbonate.

Securing future funding

As it continues to progress Paradox’s development, Anson is able to consider a number of funding options, such as equity, debt, offtake agreements and strategic investment.

The company’s board has a financing track record, which includes raising around A$14 million over the last three years to further advance the cornerstone project.

The ASX-lister also has a A$15 million equity placement facility with private investor Long State Investments Ltd.

These achievements, among others, bolsters confidence that Anson can secure the necessary capital to fund all stages of Paradox’s development.

All things considered, to bring Paradox online, Anson predicts it will need three years to complete permitting, detailed engineering and construction prior to the commissioning of phase one operations.

Quick facts: Anson Resources Ltd

Follow

ASX:ASN

Price: 0.1 AUD

Market Cap: $89.87 m

Show chart

View company profile