Looking at large vs smaller deposits a different wayThe benefit...

Looking at large vs smaller deposits a different way

The benefit that large deposits have is that the capital cost is spread over a longer life of mine.

Conceptually if you take a 20Mt deposit and build 1Mtpa of concentration capacity, the cost structure is going to be very similar to taking a 60Mt deposit and building 3Mtpa of concentration capacity. Site G&A costs are a minor part of the cost structure and will not scale proportionally to size. The major costs for lithium operations are however mining, processing and transport logistics. When transportation via established infrastructure is available, these costs tend to scale closely with size. The 60Mt deposit at 3Mtpa will get site G&A cost benefits but they won't have huge benefits on the mining, processing or logistics benefits as all of these relate primarily to the amount of material moved/processed and the gains there are made in getting to commercial scales of activity not increasing through to larger commercial sizes that often involve replication as the method of scaling.

So say the capex cost is US$250m and US$500/t is available per ton as profit or contribution towards capital costs

• If you have 1Mt at 1.2% with 70% recovery rates to a 5.5% product then you have 153kt of product. At US$500/t of margin that's US$76m and it doesn't cover the capital cost. Its unviable.
• If you have 5Mt at 1.2% with 70% recovery rates to a 5.5% product then you have 763kt of product. At US$500/t of margin that's US$382m. At low discount rates there could be a positive NPV. At medium or higher discount rates the project is unviable. Unless super well located or able to lower the capital cost, its probably unviable (but worth watching because it would likely be viable at $2,000/t spod)
• If you have 10Mt at 1.2% with 70% recovery rates to a 5.5% product then you have 1,527kt of product. At US$500/t of margin that's US$764m. Even with time discounting that should cover a US$250m capital cost for a good NPV, not billions but hundreds of millions. Projects can be viable at this size. Each ton of product is however still supporting US$163 of capex.
• If you have 50Mt at 1.2% with 70% recovery rates to a 5.5% product then you have 7,636kt of product. At US$500/t of margin that's US$3,820m. The capex cost is comfortably covered. The capital cost is down at $33/t of the life of mine cost.

So as you transition from 10Mt to 50Mt deposits, it involves capex/life of mine ton falling from $163 to $33. If you are talking about prices like US$1,500/t then this <10% difference is not the key attribute that would influence viability. logistics can have a $150/t difference between poor and favourable locations. Processing costs can vary by this amount. Mining costs can vary by several times this amount.

A 10Mt deposits viability therefore depends on aspects like location, strip ratio and whether good DMS only recovery rates exist. While more is obviously better, the threshold where viability starts is lower than 10Mt (with good location and ore characteristics).