Lithium Power on Track to Become Lowest Quartile Cost Lithium Producer
Lithium Power announced that a positive preliminary economic assessment study for its Maricunga lithium brine project in Chile. Highlights of that study include the following.
1. Production - 20,000 tpa of lithium carbonate and 74,000 tpa of potassium chloride fertiliser.
3. Project NPV – USD 731 million after tax at 8% discount rate (USD 1.049 billion before tax
4. IRR of 23.4% (ungeared).
5. Capital costs – USD 527 million (USD 389 million direct costs, including KCl plant).
6. Short payback - 2 years and 11 months (based on 2-year ramp-up period).
7. Mine life - 20 years (initial).
Analyst comment: this excellent achievement for Lithium Power positions Maricunga to become the next producing lithium asset in Chile and, in our opinion, the standout lithium brine development project globally, due to its forecast exceptionally low operating costs.
While most of the assumptions were in line with our previous estimates, capital costs are higher. We believe there may be scope to reduce these costs in future studies, given that USD 137 million of the total capital outlay was for contingencies and indirect costs.
Also boding well for the development of Maricunga is the election of Sebastián Piñera, a conservative billionaire, as the country's president. Piñera is reportedly pro-business and foreign investment, and there is a high degree of expectation that the new government will enact numerous policies to encourage and improve the lithium industry in Chile.
Valuation: we have decreased our valuation of Lithium Power to USD 1.13/share (previously USD 1.24). The driver for this reduction was higher capital costs than our previous estimate.
Lithium Power International Limited is a pure-play lithium explorer and developer, focusing on developing and fast-tracking to production the high-grade Maricunga lithium brine project in Chile.
LPI has a well known performing technical team with the experience to take the Maricunga project all the way through the development stages to production.
