Lithium Australia subsidiary VSPC highlights high-value potential of LFP battery materials with PFS

Lithium Australia NL (ASX:LIT) (OTCMKTS:LMMFF) (FRA:3MW) subsidiary VSPC Ltd (VSPC) has delivered a positive pre-feasibility study (PFS) demonstrating its capacity to produce advanced lithium ferro phosphate (LFP) cathode powders. The PFS confirmed robust project economics with proposed production to ramp up to a capacity of 10,000 tonnes per annum over a three-year period, reaching nameplate capacity in 2026.  It considered three jurisdictions for production in Australia, Vietnam and India with the case for locating the plant in India revealed as the best financial outcome with a net present value (NPV) of US$253 million and an internal rate of return (IRR) of 33%. Major indicators include:  A payback period of five years;  Annual LFP sales revenue of US$140 million;  EBITDA (earnings before interest, taxes, depreciation and amortisation) of US$66 million per annum;  A free cash flow of US$56 million per annum, and  Plant investment of US$113 million in two stages over three years.  “Alternative cathode powder supply chain” The PFS is based on proprietary VSPC process technology that provides competitive performance when compared with other processes for the manufacture of advanced LFP materials, notably the more expensive sol-gel processes used in China and Vietnam. Lithium Australia managing director Adrian Griffin said: “VSPC has completed a PFS that clearly demonstrates the value of establishing an alternative cathode powder supply chain using VSPC’s proprietary technology. "These major milestones have been achieved in an environment in which the largest electric vehicle (EV) producers are moving to incorporate LFP lithium-ion (Li-ion) batteries into entry-level vehicles, due to their superior safety, lower cost, longer life and reduced exposure to conflict metals.” Commercialising VSPC product Additional factors such as strategic partnerships with upstream mining, refining and chemical producers may provide further benefits for the commercialisation of VSPC cathode powders. Similarly, downstream partnerships (cathode and battery manufacturing) may provide additional financial benefits in other jurisdictions – with the company evaluating specific opportunities in Australia, South Korea, Europe and the United States. Global trends in LFP production are expected to follow what is occurring in China where rising LFP demand, as forecast by Roskill, are likely to see it become the dominant Li-ion chemistry in the next few years, due to its greater safety characteristics, environmental, social and governance (ESG) values and more positive cost structure. “Meeting LFP demand”  Over the past 12 months, global demand for LFP has increased by more than 25%, bringing Chinese LFP cathode powder manufacturing up to over 100,000 tonnes per annum.  Only 2% of the global LFP cathode powder production originates from outside China and with many major EV producers already manufacturing LFP-powered vehicles within China, and making these available in other jurisdictions, North America and Europe are likely to be areas of high demand.  Griffin said: “These LFP attributes are also expanding its utilisation in stationary energy-storage applications. “Major battery producers worldwide are racing to expand their LFP production to meet demand as LFP becomes the fastest growing sector of the battery industry.  "At present there is little LFP production outside of China, with original equipment manufacturers striving to secure alternative supply chains.  “Lithium Australia and VSPC aim to provide that supply chain security.”  Next steps  Lithium Australia has committed to a definitive feasibility study and next steps include: Completing a business case review for the preferred Indian option; Engaging an engineering firm for the definitive feasibility phase;  Confirmation of project location, as well as site selection; and  Conduct a Life Cycle Assessment analysis of the project to determine sustainability factors and identify opportunities to reduce carbon footprint and other sustainability initiatives.  The company will also continue to evaluate opportunities for downstream partnerships, particularly in jurisdictions where demand for LFP consumption is likely to increase rapidly; in, for example, Europe and North America.