Cut-off grade is an interesting point. It comes down to recovery rates, marginal economics and the projects assumed pricing environment. Most of the profitability from the operation will come from processing the 0.8% to 1.5%+ grade material. The comparatively standard assumption of about 0.5% or 0.6% cut-off's would appear to originate from a time when many projects were attempting to have a price point nearer US$500/t than the pricing that now looks likely of typically over US$1,000/t (SC6). Design a project for a higher price environment will typically mean a lower cut-off grade (particularly if the concentrator is located at the same site as the Mine). If contract processing emerges or projects like WR1 do end up buying the ex diamond DMS then cut-off grades would also need to reflect concentrator feed transportation costs.
If a project is going to have a 10-20x strip ratio to get ore of 1-1.5% (which is fairly typical) grades below 0.5% may be sensible to process. This post considers 0.4% cut-off and does it make sense in the context of circa US$1,000+ pricing? (its around break-even) so from a basic confirmation calculations, GT1 using a 0.4% cut-off makes sense as predictions are generally for higher prices later in the decade and into the 2030's and they plan a Canadian Hydroxide plant that will need to be fed with Spod. If Hydroxide is US$20,000/t then Spod can be >US$2,000/t.
Processing 0.2% material profitably will need prices near or above US$2,000/t and would require test work on these very low grades to what sort of recoveries occur. The use of 0.2% not a 0.4% cut-off does therefore overstate what would occur in a US$1,000/t world however many of the edges of deposit seams being defined by companies are also uneconomic at sub US$1,000/t prices. The use of US$1,400-US$1,500+/t for pit shell's is now common and even at this price a large gap remains between resources and ore reserves.
Coming back to 0.2% vs 0.4%. GT1 has released the grade recovery details on this. The LCE content for a 0.2% cut-off is 262kt. For 0.4% its 245kt and for 0.6% its 227kt (of course using 2.473 as the LCE multiplier). If GT1 were to use a 0.4% cut-off, the Seymour project would be 8.4Mt @ 1.18% grade. The LCE reported would be 6.6% lower. The information has been released to view Seymour in this way if you wish.
Testing the economics at 0.4%I'm going to assume that these low grades are incidental ore recovered. The mining has targeted the 0.6% and higher grade ore (averaging a strong 1.33%). In recovering this material some lower grade 0.4% material is recovered. The question for mine management to decide is do they consider this material waste rock? Do they process it? If the decision is to process it then including it in the MRE is sensible.
GT1 have released modelling grade recovery curves and from those curves recovery rates of around 45% recoveries are inferred for 0.4% material. More points are needed to know if the curve does indeed slope this steeply. It may not which would make the financials stronger than as calculated here.
30.55t * (0.4% / 5.5%) * 45% = 0.9998 so 30.6t of 0.4% material is modelled for a ton of SC5.5. GT1 has assumed its Seymour processing cost is C$48.87/t (US$36.65 at 0.75). 30.6t at US$36.65/t would create a SC5.5 concentrate at a price of US$1,121/t so the decision to process 0.4% material would have a cost similar to current market prices. All the grades better than 0.4% would have progressively lower costs.
If the grade recovery curve was less steep and 55% recovery was possible then only 25t of material would allow 1t of SC5.5 and the processing cost would be $916t. Processing 0.4% material may have a cost structure around $1,000/t if the alternative was calling the material waste. Its material you wouldn't process at 2024 pricing but in 2022 or 2023 pricing you would have. In 5 years time - who know's. At least planning to stockpile 0.2%-0.4% material with a plan to process it during periods of high prices would appear sensible.
Ok so as you noted WR1 who used a 0.6% cut-offAdina is a 21Mt @ 1.53% (0.79Mt LCE) deposit at a 1.2% cut-off. Its also the reported 58.5Mt @ 1.12% deposit at a 0.6% cut-off (1.62Mt LCE). This means about half the material in WR1 is under the grade of 1.2%. 0.5Mt of LCE is under 1.0% grade. What is of critical importance to the overall economics of the Adina (and for that matter most deposits) is how this average and slightly below average grade material performs on the planned processing flow sheet. High grade ore is more likely to have good DMS only recovery rates. Its the mid-grade and below mid-grade stuff that's more difficult.
The met test work done on Adina had 3 super-high grade samples with excellent DMS only recovery rates. The closest to average grade test was on 1.17% material and was down to a 66.4% recovery rate. If the recovery curve is already falling away by 1.17%, what's it doing at 1.0% or 0.8%. Are those recovery rates down into the 50% or possibly below? Are they still ok. WR1 management haven't given shareholders any information on this (or how much crushing fines are created). Management did however appear to drill a lot more material for met test work than they reported so there's an elevated risk of selective reporting.
There is a distinct risk this is a rinse and repeat of Core Lithium. Selective high grade reporting indicating DMS only will work. No reporting on crushing fines. Two of the same players (SB and his finance offsider SL).
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