@Greenmetal I wouldn't put too much weight on Essential's NPV etc as an example of "Normal" for a lithium scoping study. Investors need to remember that the directors of Essential all endorsed the current takeover offer Essential has received. They stated they would recommend shareholders accept this offer. A fantastic scoping study would make the directors look rather stupid in making this recommendation. IMO no-one would have blinked if they used a Spod rate of yr1 $2,500; yr2 $2,250; yr3 $2,000; yr4 $1,750 and yr5 onwards $1,500. They instead used a flat $1,500/t. No-one would have blinked if they used an 8% discount rate, but instead they used 10%. Elements of the case look as if it was intended to have a lower NPV rather than the highest one possible.
For Essential to get good recovery rates without unacceptable iron rates, Essential's build required DMS, Flotation and Magnetic separation. These then needed associated plant like dewatering. An alternative possibly more comparative case for GT1 is A11's DMS only scoping study from Sept 2022. This showed capex of US$125m (including in-house crushing) for 255kt of Spod (2Mt/yr of ore processing per year). GT1 ore processing case is going to look a lot closer to a hybrid of Core's and A11's because its DMS only. It will be interesting to see if they go with in-house or contract crushing.
Its also an integrated case involving at least one circa 30kt hydroxide plant build. This will add something like US$500-US$700m to the capital cost. It will also mean that the finished product will be Hydroxide. If something like a short-run US$30k-$40k/t price is assumed and a long-run US$20k/t price is used, the immediate post commissioning revenue may exceed US$1b/yr (30kt at US$34/t will do that). Piedmont Carolina plant NPV is one example to look at for what an integrated Hydroxide scoping study might look like for GT1.
Also GT1 may well show more imagination around the problem of having a smaller ore resource which exploration is still seeking to expand. The simple low imagination answer is to assume no end of life value when the concentration/conversion kit may only be 10 years old. I'd expect GT1 to be smarter than that. Some other options that could exist are:
1. Assume the capex plant can be sold when Seymour ore runs out (with the difficulty of what value to assume but it should be well above zero)
2. Assume the rest of life is spent as a tolling operation processing other Canadian Spod to Hydroxide. If there is 20-30% margins in this, that could be $4k-10k/t ($120m-$300m of EBIT spread across yrs 10-25). If you discount $200m/yr across yrs 11 to 25 @ 8% it would add $793m to the NPV.
3. Add in extra freight costs and assume at this stage western hub ore will be processed at a single initial Hydroxide plant (extending end of life beyond what Seymour can currently deliver and explaining why GT1 wants to get a McCombe JORC out before the scoping study).
4. Take today's market rates for Canadian JORC resources and assume buying one of those resources around year 5 (from operational cashflow) and developing it across years 5-10 so it supplies ore for years 10-25 of the plant.
5. Make some extrapolations around their current speed of defining new resources and what that could mean as the available JORC resource by the time the Hydroxide FID comes around.
And also for reference, A11's DMS only capital cost estimate.
