WR1 General Discussion, page-33031

Lithium Universe PFS points to strong financial viability of Bécancourlithium refinery, even in low price environment

Lithium Universe Ltd (ASX:LU7,OTC:LUVSF) has confirmed the viability of its lithium conversion project toproduce environmentally friendly, battery-grade lithium carbonate – even in alow pricing environment – with the results of a preliminary feasibility study(PFS) for its Bécancour Lithium Carbonate Refinery in Québec, Canada.

LU7’s proposed refinery will produce up to 18,270 tonnes ofgreen battery-grade lithium carbonate per year using proven expertise from theJiangsu processing model.

The company plans to source spodumene feedstock from domesticand international markets to produce a battery grade lithium carbonate productto contribute to the North Atlantic lithium supply chain and help close the theLithium Conversion Gap.

Favourable project economics

The PFS highlights the project's strong financial viability,even under conservative pricing conditions.

Key financial indicators include a pre-tax net present value(NPV8) of around US$779 million, at an 8% discount rate, and a pre-tax internalrate of return (IRR) of 23.5%. The projected payback period is 3.5 years.

The financial model assumes prices of US$1,170 per tonne forspodumene concentrate (SC6) and US$20,970 per tonne for lithium carbonateequivalent (LCE).

The project aims to generate US$383 million in annual revenue,with costs estimated at US$236 million, leading to a US$147 million EBITDA anda 38% gross margin. The total capital cost is estimated at US$494 million. Thiscost estimate is based on advanced design specifications from the JiangsuLithium Refinery model, ensuring robust financial planning and projection.

A significant milestone for LU7

“The successful completion of our preliminary feasibility studyis a significant milestone for the company, especially given that we onlylaunched in August of last year,” said Lithium Universe chair Iggy Tan “Earlyon, we recognised that bridging the lithium conversion gap in North America,leveraging our accumulated lithium expertise and the proven technology fromJiangsu, was a clear and strategic path forward.

“Our counter-cyclical strategy is centred on advancing projectsduring market downturns, allowing us to strategically position ourselves forgrowth as the market rebounds.

“We are dedicated to funding and constructing a proven, low-risklithium conversion refinery in Québec, marking the first step towardestablishing Québec as the lithium conversion hub for the Transatlantic region.

“The strong NPV and returns for the project indicate aneconomically viable project. We will be looking to secure strategic partners atthe project level to help fund the project.

"There is significant interest from OEMs with spodumeneofftake supply seeking conversion outside of China, and discussions are alreadyunderway.

“We are confident that the Bécancour lithium refinery, with anannual capacity of 18,270 tonnes, will emerge as a leader in producing green,battery-grade lithium carbonate.

“The company will advance quickly to complete a definitivefeasibility study and finalise offtake partnerships.”

Leveraging counter-cyclical strategy amid market downturn

Lithium Universe is leveraging a counter-cyclical strategyfocused on project development during the current lithium price downturn.

The company considers current market conditions to offer anideal opportunity to develop its Bécancour Lithium Carbonate Refinery. Whileoversupply has led to a decline in lithium prices, LU7 is optimistic aboutlong-term demand, largely driven by the electric vehicle (EV) and energystorage sectors.

As weaker players exit due to falling prices, LU7 sees thedownturn as a chance to advance its projects, positioning itself for futureprice recovery.

“By advancing our project now, we aim tobe well-prepared to capitalise on future growth,” the company stated.

Over the past four years, lithium prices have experiencedsignificant fluctuations, rising over 400% between 2020 and 2022 due toincreased demand and supply chain disruptions associated with COVID-19.

By 2023, prices began to stabilise as new mining and refiningprojects came online.

LU7 believes a rebalancing phase is now underway as majorproducers, such as Core Lithium and Albemarle, have either slowed or haltedoperations to manage the oversupply.

LU7 expects prices to recover to more sustainable levels within12–18 months, though not reaching the record highs seen in 2021–2022. Thecompany believes its strategy will position it for success as the lithiummarket stabilises.