How do you mine and process Lei and does this plan by LPM have flow-on implications for Core?
Lei has a vertical structure like BP33 and like BP33 has the top ~50-75m being weathered. The 0.42Mt drilled to indicated is between ~50m and 250m deep. There would not appear to be enough ore in the upper regions of the pegmatite to justify a large open pit (at least while part of the near surface pegmatite is located on Core's side of the tenement and no unification deal has been done). Most, if not all of Lei will need UG mining.
The LPM plan will therefore need to be UG mining to provide the upgraded DSO product it plans to ship. Among the better case scenarios is that Develop's Pioneer Dome estimate whereby UG ore has an opex cost of A$71/t, this is however a fatter and less deep ore body. I'll assume the ore costs A$100/t to recover because that makes it easy to scale to any other alternative.
The testing LMP has reported relate to the amenability of ore to be crushed to 10-25mm and sorted via a UV ore sorter. Using the ROM Sample, they started out with 42kg of drill core. In looking to crush it to 10-25mm and 28% crushed to a smaller size than intended. These aren't the same sized fines that have caused Core issues, but its the same generic issue - a significant proportion of the material crushes to a smaller than planned size. Crushing issues may continue across to BP33.
When the remaining 72% (30.2kg) was put through a "rougher" ore sorter it was converted into two buckets: 10.56kg of Rougher Concentrate with a grade of 3.51% and 19.8kg of Rougher Waste with a grade of 0.44%. If LPM stopped at this point they have a 62.8% recovery rate to a 3.51% product. The rougher concentrate is 10.56kg of 42kg so you need approximately 4t of ore for each ton of finished product. Before capex, processing, royalties and shipping costs its A$400/t for 3.51% grade product.
This step is potentially commercial option however it raises an interesting question, what would you do with the 28% of material that is fines (material crushed to a top size of 10mm). This is the exact definition of what Core was processing through its DMS so their flow sheet material of 10mm or smaller. There appears a good chance that if LPM isn't taken over by Core, they would be supplying this <10mm product to Core for it to put through its existing DMS because Core would be the buyer prepared to pay the most for this product given its production location of 7km from its DMS.
LPM also explored a cleaner 2nd UV sorter that achieved a 5.25% product with a 31.3% recovery. The mass yield was 8.3% (3.5kg from 42kg). While this stage has produced a standard commercial concentrate the economics in isolation look challenging. 12t of ore would be needed to generate 1t of 5.25% concentrate with the recovery rate noted. If that ore cost A$100/t the cost of the concentrate is A$1,200/t for SC5.25 before factoring in the capex of two UV screeners, processing, royalties, shipping costs and any mining capex not included in the A$100/t ore price assumed. To run this business model you either need to obtain useful revenues from the material not concentrated to 5.25% or need a high Spod price environment of perhaps US$1,500+/t for SC6. Both are possible but shipping 3.5% product may be LPM's better option.
If the 0.44% Rougher waste was simply that - waste rock then it may have a dirt cheap (pun intended) purchase price by Core. Assuming a low 50% recovery rate you would need to put 22t of this material through a DMS to get a ton of SC4.8. If it cost Core A$30/t to process then at a free cost to Core as LPM avoids using up tailings space then this would be A$660/t product. This however would also only be sensible for Core if they had idle DMS capacity. Despite its 0.44% grade, the Rougher waste may become either landfill or part of the mix for infilling UG voids. There's a reason why WA operations often had a ~0.5% grade cut-off in the JORC deposits.
Additional implications for Core - Amended future core flow sheet Core's DMS has stronger recoveries for the same or better grades than the two UV sorter combo that LPM has investigated. This UV based technology would not be an improved substitute for the DMS. The average rougher waste was 44.7% of the volume. If a period of high prices were to occur, Core could potentially run 1.8Mt through a UV ore sorter and lose ~44.6% of the material while "only" losing 14% of the spod. This is considering the "combined product" volumes step noted by LPM.
If Core started with 1.8Mt of 1.4% material and lost 15% of the lithium units in concentrating it to 1.0Mt Core would have a 2.14% DMS feed grade. If this material had a 77% recovery rate then you would have 300ktpa of SC5.5. It would clearly need further investigation, but it may be a shorter lead time, low capex option to increase DMS output in a period of high prices. If lead times weren't an issue another DMS unit or Flotation may still be better capacity increase options for Core.
CXO Price at posting:
10.0¢ Sentiment: Buy Disclosure: Held
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