Sal de Vida Update Delivers Improved Economics, Resource and Reserve
BRISBANE, Australia, Sept. 24, 2023 (GLOBE NEWSWIRE) -- Allkem Limited (ASX|TSX: AKE) (“*Allkem”* or “*the* *Company”*) is pleased to provide a project update to its wholly owned Sal de Vida Project located in Catamarca Province in Argentina. Allkem has reviewed and updated the project Mineral Resources and Ore Reserves, project cost and schedule estimates, and project economics from the previous technical report dated March 2022 Technical Report (*“previous study”*) released shortly after the merger of Orocobre Limited and Galaxy Resources to form Allkem.
*HIGHLIGHTS *
*Stage 1 and 2 (45,000 lithium carbonate equivalent tonnes per annum)*
*Financial Metrics*
· Material ~82% increase in Pre-tax Net Present Value (“*NPV*”) to US$5.51 billion from US$3.04 billion in the previous study at a 10% discount rate. The Post-tax NPV[10] is US$3.18 billion
· Operating cost increased from US$3,280 per tonne lithium carbonate equivalent (“*LCE*”) to US$4,003 per tonne LCE due to increases in the price of soda ash, lime and labour costs since the previous study
*Mineral Resource and Ore Reserve*
· Total Mineral Resource Estimate of 7.17 million tonnes (“*Mt*”) lithium carbonate equivalent (“*LCE*”), a 5% increase from the previous estimate in 2022, with a 41% increase in Measured Mineral Resources
· Total Ore Reserve Estimate of 2.49 Mt LCE supporting a 40-year project life based on Ore Reserves only, a 43% increase from the previous statement due to a revised point of reference for Ore Reserve reporting of ‘brine pumped to the evaporation ponds’
*Stage 1 (15,000 **lithium carbonate equivalent** tonnes per annum)*
*Financial Metrics*
· Increase in Pre-tax NPV from US$1.23 billion in the previous report to US$2.01 billion at a 10% discount rate, representing a ~63% increase in value reflecting an increase in lithium price assumptions and market outlook
· Operating costs increased from US$3,612 per tonne LCE increased to US$4,529 per tonne LCE due to increases in the price of soda ash, lime, natural gas and labour costs since the previous study
*Project Cost and Schedule Update*
· Increase in the development capital cost estimate (*“CAPEX”*) from US$271 million in the previous study to US$374 million, for mechanical completion, representing a 38% increase which is in line with inflationary conditions
· Substantial mechanical completion, pre-commissioning and commissioning activities are expected in H1 CY25 with first production expected H2 CY25 and ramp up expected to take 1 year
*Stage 2 (30,000 tonnes **lithium carbonate equivalent **per annum)*
*Project Cost and Schedule Update *
· The prefeasibility study update confirms the Stage 2 expansion will be completed on the same design basis as Stage 1 with a twofold modular replication of the Stage 1 design
· CAPEX is estimated at approximately US$657 million, up from US$523 million in the previous study, representing a 25% increase, with Stage 2 benefiting from Stage 1 detailed engineering, established on site infrastructure and established regional construction teams and facilities
· Stage 2 construction is anticipated to commence upon receipt of applicable permits and substantial mechanical completion of Stage 1 with Stage 2 first production approximately 2.5 - 3 years thereafter
*Managing Director and Chief Executive Officer, Martin Perez de Solay commented *
“The updated study results clearly demonstrate the exceptional value and robustness of this project and its future expansion. As expected, global inflation has resulted in higher capital and operating costs but it remains clear that we will deliver material shareholder value through the development of Sal de Vida. Pleasingly the resource and reserve have continued to grow and will underpin future development.”
*PROJECT BACKGROUND*
*Figure 1: Sal de Vida project location*Allkem is developing the Sal de Vida Project in Catamarca Province on the Salar del Hombre Muerto, approximately 1,400km northwest of Buenos Aires, Argentina. The Sal de Vida deposit lies within the “lithium triangle”, an area encompassing Chile, Bolivia and Argentina that contains a significant portion of the world’s estimated lithium resources (Figure 1). Catamarca is a proven mining jurisdiction and home to a number of successful mining operations.
In 2022, Allkem commenced development of the 15,000 tonne per annum (“*tpa*”) Sal de Vida Stage 1 project. Construction is expected to be completed in the first half of 2025. Allkem plans a further 30,000 tpa modular (15,000 tpa + 15,000 tpa) Stage 2 expansion which is currently at a pre-feasibility study phase. The Project aims to produce 45,000 tpa in total from the planned staged expansions.
The Stage 1 wellfield, brine distribution, evaporation ponds, waste (wells and ponds) and Stage 1 process plant cost estimates are Association for the Advancement of Cost Engineering (*“AACE”*) Class 2 ±10%. Costs for the 30,000 tpa Stage 2 are AACE Class 4 +30% / - 20% with no escalation of costs.
Lithium production has not commenced at the Sal de Vida site. As of 31 August 2023, Sal de Vida Stage 1 construction was approximately 32% complete. Detailed engineering, quantity estimation, contractor pricing, permitting and social aspects are sufficiently progressed to report to feasibility study level estimate for Stage 1. The layout and development plan for Stage 1 allows for future expansion for subsequent stages. An update to the pre-feasibility study (“*PFS*”) has been completed for Sal de Vida Stage 2.
*GEOLOGY & MINERALISATION *
The salar system in the Hombre Muerto basin is considered to be typical of a mature salar. Several salars in the lithium triangle contain relatively high concentrations of lithium brine due to the presence of lithium-bearing rocks and local geothermal waters associated with Andean volcanic activity. Such systems commonly have a large halite core with brine as the main aquifer fluid in at least the centre and lower parts of the aquifer system.
Sal de Vida’s brine chemistry has a high lithium grade, low levels of magnesium, calcium and boron impurities and readily upgrades to battery grade lithium carbonate. Long-term hydrological pump testing under operating conditions has demonstrated excellent brine extraction rates to support the production design basis.
*RESOURCE AND RESERVE ESTIMATES *
*Production wellfield pumping *
The production wellfield drilling program commenced in late 2020 to construct an additional eight wells in the eastern region of the salar for Stage 1 brine production and to explore the resource at depth. The drilling program which also entailed aquifer and pump testing reached completion in October 2021 and was monitored by consultants Montgomery & Associates (“*Montgomery*”) and Allkem personnel. Since 2022, intermittent pumping has occurred from the Stage 1 eastern wellfield. Figure 2 shows the total registered pumping between July 2022 and April 2023 and corresponding lithium extracted from the production wells. Figure 3 shows the location of identified resources.
*Figure 2: Registered pumping and extracted lithium from the Stage 1 eastern wellfield*
*Figure 3: Location map of Measured, Indicated and Inferred Lithium Mineral Resources*
*Brine Mineral Resource Estimate *
Montgomery was engaged to estimate the lithium Mineral Resources and Ore Reserves in brine for various areas within the Salar del Hombre Muerto basin in accordance with the 2012 edition of the JORC code (“*JORC 2012*”). Although the JORC 2012 standards do not address lithium brines specifically in the guidance documents, Montgomery followed the NI 43-101 guidelines for lithium brines set forth by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM 2014) which Montgomery considers complies with the intent of the JORC 2012 guidelines with respect to providing reliable and accurate information for the lithium brine deposit in the Salar del Hombre Muerto.
Long-term pumping and production from the Stage 1 eastern wellfield (Figure 2) has increased confidence in that area of Allkem’s concessions. Thus, the east-central Resource polygons have been upgraded from Indicated Mineral Resources to Measured Mineral Resources (Figure 3), leading to an increase in Measured Mineral Resources of 1.03 Mt. Furthermore, a lithium cut-off grade of 300 mg/L was utilised based on a projected LCE price of US$20,000 per tonne over the entirety of the LOM, leading to a total Resource increase of 0.32 Mt LCE. The total revised Mineral Resource estimate of 7.17 Mt LCE (detailed in Table 1) reflects a ~5% total increase to the prior Mineral Resource of 6.85 Mt LCE (Table 2).
The different Mineral Resource categories were assigned based on available data and confidence in the interpolation and extrapolation possible given reasonable assumptions of both geologic and hydrogeologic conditions. Measured, Indicated and Inferred Mineral Resource polygons; totalling 160.9 km^2, are displayed in Figure 3.
*Table 1: Sal de Vida Mineral Resource Estimate at August 2023 *
*Category* *Brine volume * *Average Li * *In Situ Li * *Li*[*2*]*CO*[*3*]
*Equivalent * *Li*[*2*]*CO*[*3*]
*Variance to 2022* m^3 mg/l tonnes Tonnes %
Measured 8.8 x 10^8 752 660,595 3,516,000 41 %
Indicated 7.6 x 10^8 742 564,375 3,004,000 -20 %
*Measured & Indicated* 1.6 x 10^9 747 1,224,970 *6,520,000* 5 %
Inferred 2.2 x 10^8 556 122,497 652,000 5 %
*Total * *1.9 x 10*^*9* *724* *1,347,467* *7,172,000* 5 %
Note: Cut-off grade: 300 mg/L lithium. The reader is cautioned that Mineral Resources are not Ore Reserves and do not have demonstrated economic viability. Values are inclusive of Ore Reserve estimates, and not “in addition to”.
*Table 2: Sal de Vida Mineral Resource Estimate at April 2022 *
*Category* *Brine volume * *Average Li * *In Situ Li * *Li*[*2*]*CO*[*3*]
*Equivalent * m^3 mg/l tonnes tonnes
Measured 6.2 x 10^8 757 467,235 2,487,000
Indicated 8.9 x 10^8 793 703,201 3,743,000
*Measured & Indicated* 1.5 x 10^9 775 1,170,437 *6,230,000*
Inferred 2.1 x 10^8 563 116,668 621,000
*Total * *1.7 x 10*^*9* *752* *1,287,105* *6,851,000*
Note: Cut-off grade: 500 mg/L lithium. The reader is cautioned that Mineral Resources are not Ore Reserves
and do not have demonstrated economic viability. Values are inclusive of Ore Reserve estimates, and not
“in addition to”.
Additional information for the resource estimation can be found in the Annexures.
*Brine Ore Reserve Estimate *
The revised Ore Reserve Estimate of 2.49 Mt LCE for 40 years reflects a 43% increase compared to the previous estimate of 1.74 Mt LCE for 40 years. The difference in total tonnage is attributable to the point of reference of the declared reserve which has been aligned with the method used at Olaroz and other major brine deposits. Process efficiency factors were considered in the previous estimate, while the current reserve is reported from a point of reference of brine pumped to the evaporation ponds.
The updated Proved and Probable Ore Reserves are displayed in Table 3, and a comparison to the previous Brine Ore Reserve Statement is presented in Table 4. Based on the modelled hydrogeological system and results of the numerical modelling, the Proved Brine Ore Reserve reflects what is feasible to be pumped to the ponds during the first seven years of operation at each of the wellfields. Compared to the previous estimate, this represents a 1-year increase in the Proved Period which is mainly due to higher certainty from long-term pumping in the eastern wellfield. Furthermore, pumping optimisation was undertaken for the current estimate to extract more brine from wells with higher allowable pumping rates and lithium concentrations.
The model projects that the wellfields will sustain operable pumping for 40 years; the last 33 years of pumping from each wellfield has been categorised as Probable Brine Ore Reserves. The Proved and Probable Ore Reserve estimate of 2.49 Mt LCE represents approximately 38% of the current Measured and Indicated Brine Resource estimate.
*Table 3: Sal de Vida Ore Reserve Estimate at August 2023 *
*Category* *Wellfield* *Time Period* *Li Total Mass* *Li*[*2*]*CO*[*3*]* Equivalent* *Li*[*2*]*CO*[*3*]* Variance to 2022* years tonnes tonnes %
Proved Stage I East 1-7 30,541 163,000 81 %
Proved Stage II Expansion 3-9 53,046 282,000 57 %
*Total Proved* 1-9 83,587 445,000 65 %
Probable Stage I East 8-40 146,520 780,000 53 %
Probable Stage II Expansion 10-40 236,947 1,261,000 31 %
*Total Probable* 8-40 383,467 2,041,000 39 %
*Total Proved and Probable* *40* 467,054 2,486,000 43 %
Note: Assumes 300 mg/L Li cut-off grade
*Table 4: Sal de Vida Ore Reserve Estimate at April 2022 *
*Category* *Wellfield* *Time Period* *Li Total Mass* *Li*[*2*]*CO*[*3*]* Equivalent* years tonnes tonnes
Proved Stage I East 1-6 16,908 90,000
Proved Stage II Southwest 3-8 33,817 180,000
*Total Proved* 1-8 50,725 270,000
Probable Stage I East 7-40 95,828 510,074
Probable Stage II Southwest 9-40 180,365 960,045
*Total Probable* 7-40 276,193 1,470,118
*Total Proved and Probable* 40 326,919 1,740,119
Note: Assumes 500 mg/L Li cut-off grade, 70% Li process recovery
Table 5 shows the summary of total pumped brine and projected average grade of the current Proved and Probable Ore Reserves.
*Table 5: Total pumped brine and projected average grade of Proved and Probable Ore Reserves at August 2023*
*Reserve Category* *Wellfield* *Time Period* *Projected Total Brine Pumped* *Projected Average Grade Li* Years m^3 mg/L
Proved Stage I East 1-7 3.90E+07 785
Proved Stage II Expansion 3-9 6.58E+07 807
*Total Proved* *1-9* *1.05E+08* *799*
Probable Stage I East 8-40 2.02E+08 726
Probable Stage II Expansion 10-40 3.11E+08 763
*Total Probable* *8-40* *5.13E+08 * *748*
*Total Proved and Probable* *40* 6.18E+08 757
The current numerical model projections suggest that additional brine could be pumped from the basin from the proposed wellfields past a period of 40 years. However, recalibration of the model would be required after start-up pumping of each wellfield to refine the model and support this projection.
Additional information for the reserve estimation can be found in the Annexures.
*BRINE EXTRACTION AND PROCESSING*
Front-end engineering design (“*FEED*”) work for Stage 1’s wellfields to process plant and non-process infrastructure has been completed for an initial production capacity of 15ktpa, later expanding to 45,000ktpa in Stage 2. A summary of the key physicals is displayed in Table 6Table 6.
*Table 6: Stage 1 - Summary of Stage 1 physicals for a 40-year project life*
*Key Physicals * *UoM*
Lithium Carbonate Produced life of mine t LC 595,385
Lithium Carbonate Produced (annual average) – Stage 1 t LC 15,000
Pond grade feed into process plant Wt % Li 1.7
Pond Recovery (entrainment + leakage) % 81
Plant Recovery (liming filter cake) % 89
Average Product grade^1 % Li[2]CO[3] >99.65
^1 Product mix entails 80% battery grade, 20% technical grade
The process commences with brine extracted from wells extending to a depth of up to 280m in the salar. Brine is pumped to a series of evaporation ponds, where it is evaporated and will be processed at the onsite lithium carbonate plant.
The wellfields are located on the Salar del Hombre Muerto over the salt pan, with minimal infrastructure residing on the surface. The brine distribution systems traverse the salar to where the evaporation ponds are located. The process plant is located adjacent to the evaporation ponds on colluvial sediments. The waste disposal areas will surround the evaporation ponds.
The process plant consists of a lithium carbonate plant with a liming plant and associated plant infrastructure, such as the power station, fuelling and workshops. Process facilities are divided into four main areas including the wellfield and brine distribution, evaporation ponds, the lithium carbonate plant and discard stockpiles. The process flowsheet is described below and summarised in Figure 4.
As of 30 June 2023, the construction of the first two strings of ponds reached over 98% completion with the first 9 ponds completed and filled with brine and all ponds lined. The engineering for the third string of ponds has been completed and earth works have commenced. The main brine pipeline is complete and the production wells have been commissioned. Camp expansion activities and procurement of long lead items has progressed with the arrival on site of a number of items of proprietary equipment. Detailed engineering of the Process Plant continues, and steady progress has been made on procurement of bulk materials. Process Plant construction has also advanced with the mobilisation of the EPC contractor and continuation of civil works including delivery and installation of pre-cast foundations and associated concrete works.
*Figure 4: Sal de Vida Simplified Process Flow Diagram*
*Wellfield and brine distribution *
There are two wellfields considered for production; one in the East and one in the Southwest. For Stage 1, only wells from the East wellfield will be used, while Stage 2 will utilise the Southwest wellfield. The locations of production wells were selected to reduce long-term freshwater drawdown and maintain the highest possible brine grade.
Ten wells have been constructed for Stage 1, all wells will be connected through pipelines to a booster station that is be situated in a central location to the wellfield. The booster station combines brines from the different wells and acts as a brine pumping station to reach the ponds and provide a buffer for seasonal flow changes. The average flow from the brine wells to the first evaporation ponds will be approximately 159 litres per second (“*L/s*”) for Stage 1.
*Evaporation ponds*
The solar evaporation pond system consists of a series of halite and muriate (KCl) ponds, which concentrate brine to a Li concentration suitable for feeding the lithium carbonate plant. The ponds for Stage 1 cover a total area of approximately 450 ha and Stage 2 will cover a total of 850 ha. These areas were calculated based on the expected evaporation rates and the production well flow rates.
Halite ponds for Stage 1 are arranged in three strings which operate in parallel, each string contains six cells plus a buffer pond with the flow from one pond to the next in series. Ponds of the same type are connected through weirs, which allow for constant natural flow from one pond to the next, maintaining brine levels in all ponds.
Evaporation results from the combination of solar radiation, wind, temperature and relative humidity. Halite salts (primarily sodium chloride) precipitate at the bottom of the pond, are harvested periodically and stockpiled in accordance with environmental requirements. The muriate ponds will have the same design basis and be located adjacent to the halite ponds. When the brine reaches a Li concentration of 21 g/L, it will be stored in a set of concentrated brine storage ponds, from where the brine will be fed to the lithium carbonate plant.
*Liming *
The halite ponds will feed evaporated brine to the liming stage to partially remove magnesium. A solution of milk-of-lime will be added to the brine inside mixing tanks, precipitating magnesium and removing other impurities such as boron and sulphates. The solids will be separated from the brine and pumped to a discard facility. The limed brine will be fed to a series of muriate ponds for further concentration. It will then be stored in the concentrated brine storage ponds to act as buffer ponds before feeding the process plant, to accommodate seasonal flow variations and provide consistent feed to the process plant.
*Lithium carbonate plant *
The lithium carbonate plant is designed to produce 15,000 tpa of lithium carbonate in Stage 1, with Stage 2 enabling the production of an additional 30,000 tpa. The plant design was based on average brine supplies of 26 m3/h for Stage 1 and an additional 52 m3/hr for stage 2 respectively. The design includes an average lithium concentration of 21 g/l in the softening feed. Plants will operate continuously with a design availability of 91%.
Brine from the concentrated brine storage ponds will re-enter the process plant in the softening stage to further remove magnesium and calcium. Solid contaminants will be sent to a filter cake tank to be re-pulped with the liming discards before reporting to the discard facility. Softened brine will report to an ion exchange (“*IX*)” circuit feed tank to remove the remaining calcium and magnesium ions and meet battery grade specifications. Lithium-concentrated brine from the IX stage will be combined with sodium carbonate at elevated temperatures to produce lithium carbonate. The lithium carbonate solids will be recovered while the liquor will be recycled back into the process. The lithium carbonate solids will be dried to <1% moisture, before being filtered and cooled. The solids will be micronised and iron contaminants will be removed magnetically. The micronised product will then be bagged for transport and sale.
*Salt waste disposal *
During the evaporation phase the build-up of solid sodium chloride, magnesium, boron and sulphate salts will occur in the ponds. Over time the solids will build to a level where their removal is required to maintain a working liquid volume within the ponds. All ponds will be harvested on average once per year with the solids placed in storage facilities adjacent to the ponds. The estimated annual total of salt harvested and stockpiled from the halite ponds is 1.4 million tpa, and from the muriate ponds is 79,000 tpa for Stage 1 of the Project. For Stage 2, the annual salt harvest will be 2.8 million tpa and 158,000 tpa for halite and muriate ponds respectively.
The salt disposal facility covers ~300 ha for Stage 1 and 600 ha for Stage 2 and will consist of halite, muriate, and co-disposal stockpiles surrounding the halite ponds. All salt waste is of similar chemistry to the surrounding salar and no adverse environmental impacts are expected.
*Final product *
Project economics are based on a production and sales volume mix comprising 80% battery grade and 20% technical grade. The operating intention is to maximise the production of battery grade however the 20% allowance for lower grade products is a prudent approach at this stage of the development.
*SITE LAYOUT & INFRASTRUCTURE *
The Project’s tenements cover 26,253 ha and all process facilities will be located in the southeastern sector of the Salar del Hombre Muerto. As seen in Figure 5, the East Wellfield for Stage 1 is located on the eastern sub-basin of the Salar del Hombre Muerto over the salt pan, and the ponds for Stage 1 are located in two areas directly south. Stage 2 will be located southeast of the Southwest wellfield.
The brine distribution system traverses the salar towards where the evaporation ponds are located. The location of the ponds has been determined based on a number of factors including optimal constructability properties and minimising earthworks, environmental impact and risk of flooding.
The processing plant for all stages is located adjacent to Stage 1’s evaporation ponds. A road system, including ramps and causeways, connects the processing facilities and provides access to all working areas.
*Supporting infrastructure & logistics*
The following main facilities are planned for the Project:
· Raw water system
· Power generation and distribution
· Fuel storage and dispensing
· Construction camp to accommodate up to 900 people
· Sewage treatment plant
· Fire protection system
· Buildings for the process plant, reagent and product storage
· Various buildings for administration and site services
· Site roads, causeways and river crossings
· Communications and mobile equipment
· Steam generation, water heating and compressed air system
· Drainage system
*Figure 5: Site layout for Stage 1 (blue) and Stage 2 expansion (green)*
The main route to the Project site is from the city of Catamarca via national route 40 to Belen, then provincial route 43 through Antofagasta de la Sierra to the Salar del Hombre Muerto. The road is mostly paved to Antofagasta de la Sierra and continues unpaved for the last 145 km to Salar del Hombre Muerto. This road is well maintained and also serves Livent Corporation’s Fenix lithium operations and Galan Lithium Ltd.’s Hombre Muerto Project. The Project is also serviced by key infrastructure including major roads, rail, air and multiple seaports in Argentina and Chile.
The Ferrocarril Belgrano railway line is located 100 km to the north of the Project and the use of rail during later project stages is a possibility. A public airstrip is located in Antofagasta de La Sierra and a private airstrip is located at Livent’s Salar del Hombre Muerto operations.
International cargo for Sal de Vida could use a combination of ports in Buenos Aires, Argentina and Chile. The Ports of Antofagasta and Angamos consist of deep-water port facilities serving the mining industry in northern Chile. The Ports of Rosario, Campana and Buenos Aires consist of large port facilities serving multiple industries in Argentina’s main economic hubs.
*FINANCIAL PERFORMANCE *
*Development Capital and Operating Costs *
Project development capital expenditure (*“CAPEX"*) for both stages combined producing 45,000 tpa lithium carbonate is estimated to be US$1,031 million. Further details are summarised in Table 7.
*Table 7: Stage 1 and 2 - Summary of Development Capital Cost*
*Development Capital Cost * *Units* *Stage 1*
*Feasibility Study * *Stage 2*
*Pre-feasibility Study * *Total *
*Direct Cost*
General Engineering & Studies US$M 11 34 *46*
Wellfield & Brine Distribution US$M 13 25 *37*
Evaporation Ponds & Waste US$M 68 141 *209*
Lithium Carbonate Plant US$M 182 342 *524*
Utilities US$M 9 16 *25*
Infrastructure US$M 23 13 *36*
*Total Direct CAPEX * *US$M* *306* *571* *877*
Owners Cost + Contingency US$M 69 86 *154*
*TOTAL CAPEX* *US$M* *374* *657* *1,031*
Minor discrepancies may occur due to rounding
The Stage 1 project development CAPEX estimated to be US$374 million up to mechanical completion, this represents a 38% increase from US$271 million in the previous study. The estimate includes wellfields to ponds, the lithium carbonate plant, non-process infrastructure and various indirect costs detailed in Table 7. The increase includes a ‘new’ foreign goods and services tax (Decree 377/2023) (US$11 million), a schedule extension (US$29 million), regional inflation and FX adjustments (US$38 million), and a re-estimate of contingency (US$21 million) on the remainder of the project.
Stage 2 CAPEX is estimated at approximately US$657 million, up from US$523 million in the previous study, representing a 26% increase. The development CAPEX estimate for Stage 2 is supported by the design basis of Stage 1 with the fundamental approach to replicate Stage 1 twofold in the Stage 2 design with increased wells, pumps, evaporation ponds and plant capacity. The future project will benefit from Stage 1 through detailed engineering, established on site infrastructure and established regional construction teams and facilities. Intangible benefits include the continuity of people, systems and processes, engineering efficiencies and the targeted allocation of contingency.
Operating expenditure (*“OPEX”*) is estimated to be US$4,529 per tonne LCE for Stage 1 from US$3,612/t LC in the previous study due to material increases in the price of soda ash, lime and labour costs.
Operating cost for all stages is estimated to average US$4,003 per tonne LCE, a 12% decrease compared to Stage 1 on a standalone basis. Further details are summarised in Table 8.
*Table 8: Stage 1 and 2 - Summary of Operating Cost*
*Operating Cost * *Units* *Stage 1*
*Feasibility Study * *Stage 2*
*Pre-feasibility Study * *Total *
Reagents US$/t LCE 1,681 1,844 *1,680*
Labour US$/t LCE 703 257 *411*
Energy US$/t LCE 608 603 *605*
General and Administration US$/t LCE 801 432 *529*
Consumables and Materials US$/t LCE 561 415 *603*
Transport and Port US$/t LCE 175 175 *175*
*TOTAL OPERATING COST* *US$/ t LCE* *4,529* *3,726* *4,003*
Minor discrepancies may occur due to rounding
For SDV Stage 2, operational synergies are expected with labour, reagents and product handling.
*Lithium carbonate price forecast *
Lithium has diverse applications including ceramic glazes, enamels, lubricating greases, and as a catalyst. Demand in traditional sectors grew by approximately 4% CAGR from 2020 to 2022. Dominating lithium usage is in rechargeable batteries, which accounted for 80% in 2022, with 58% attributed to automotive applications. Industry consultant, Wood Mackenzie (“*Woodmac*”) estimates growth in the lithium market of 11% CAGR between 2023-2033 for total lithium demand, 13% for automotive, and 7% for other applications.
Historical underinvestment and strong EV demand have created a supply deficit, influencing prices and investment in additional supply. Market balance remains uncertain due to project delays and cost overruns. The market is forecast to be in deficit in 2024, have a fragile surplus in 2025, and a sustained deficit from 2033.
Prices have fluctuated in 2022-2023, with factors like plateauing EV sales, Chinese production slowdown, and supply chain destocking influencing trends. Woodmac notes that battery grade carbonate prices are linked to demand growth for LFP cathode batteries and are expected to decline but rebound by 2031. Lithium Hydroxide’s growth supports a strong demand outlook, with long-term prices between US$25,000 and US$35,000 per tonne (real US$ 2023 terms).
*PROJECT ECONOMICS *
An economic analysis was developed using the discounted cash flow method and was based on the data and assumptions for capital and operating costs detailed in this report for brine extraction, processing and associated infrastructure. The evaluation was undertaken on a 100% equity basis.
The basis of forecast lithium carbonate pricing was provided by Woodmac for the period 2023 to 2035, with a longer-term price of US$28,000/t and US$26,000/t used for battery grade and technical grade lithium carbonate from 2035 onwards.
A royalty agreement with the Catamarca Provincial Government has been executed, confirming a life of project royalty rate at 3.5% of net sales revenue (revenue less taxes). This agreement applies to both the SDV Stage 1 and Stage 2 expansion.
The key assumptions and results of the economic evaluation are displayed in Tables 9 and 10 below.
*Table 9: Key assumptions utilised in the project economics*
*Assumption * *Units* *Stage 1 * *Stage 2*
Project Life Estimate Years 40 40
Discount Rate (real) % 10 10
Provincial Royalties^ 1,2 % of LOM net revenue 3.5 3.5
Corporate Tax^2 % 35 35
Annual Production^3 tonnes LCE 15,000 30,000
CAPEX US$M 374 657
Operating Cost US$/tonne LCE 4,529 3,726
Average Selling Price^4 FOB US$/tonne LCE 27,081 26,922
^1 Provincial royalty agreement at 3.5%, export duties, incentives and other taxes are not shown.
^2There is a risk that the Argentina Government may, from time to time, adjust corporate tax rates, export duties and incentives that could impact the Project economics.
^3 Based on 80% battery grade, 20% technical grade lithium carbonate of annual production.
^4 Based on price forecast provided from Wood Mackenzie and targeted production grades stated in Footnote 3 above.
The study update for all stages demonstrates strong financial outcomes with a pre-tax NPV at a 10% discount rate of US$5.51 billion, this represents a ~82% increase from US$3.04 billion in the previous study. SDV Stage 1 reflects an increase in pre-tax NPV from US$1.23 billion in the previous report to US$2.01 billion at a 10% discount rate, representing a ~63% increase in value.
Further project economics are summarised in Table 10.
*Table 10: Stage 1 and 2 – Summary of financials over a 40-year project life*
*Financial Summary * *Units* *Stage 1*
*Feasibility Study * *Stage 2*
*Pre-feasibility Study * *Total *
NPV @ 10% (Pre-tax) US$M 2,006 3,509 *5,515*
NPV @ 10% (Post-tax) US$M 1,152 2,028 *3,180*
IRR (Pre-tax) % 45.5 50.3 *47.7*
IRR (Post-tax) % 32.5 35.3 *33.9*
Payback Period^1 Years 2.6 2.4 *3.7*
Development Capital Intensity US$ / tpa LC 24,959 21,891 *22,914*
^1 Payback period is from date of first commercial production
*Sensitivity Analysis *
As displayed in Table 10, the SDV Stage 1 study update demonstrates strong financial outcomes with a post-tax NPV at 10% discount rate of US$1,152 million and post-tax IRR of 32.5%. Figure 6 analyses the impact on post-tax NPV when pricing, operating cash costs and development CAPEX fluctuate between +/- 25 %.
*Figure 6: NPV Sensitivity Analysis*
*ENVIRONMENTAL AND SOCIAL IMPACTS *
*Carbon emissions management *
Allkem is committed to the transition to net zero emissions by 2035 and is progressively implementing actions across the group to achieve this target.
Power generation at Sal de Vida is designed to be sourced initially from diesel generators, and then from gas generators, whilst maximising a photovoltaic energy solution. A standalone study is being undertaken with the intention of replacing all remaining site-based diesel generated power with natural gas. Allkem is targeting 30% of power generation for Stage 1 production to be sourced from photovoltaic energy generated by a site-based solar farm. The Company is currently in a tender process to install this hybrid solution for day 1 of Stage 1 production.
*Environment *
Allkem is committed to the responsible use of water resources and minimising environmental impacts. The internally developed process flowsheet was selected partly on the basis it consumed significantly less energy and water than other conventional technologies.
The Sal de Vida Project will consume minor amounts of raw water, equivalent to 1-2% of the total groundwater recharge to the system. There is no expected loss of water to communities with either their groundwater or surface water usage. Water monitoring takes place at seven different control points alongside nearby rivers in addition to periodic sampling to test flow rates, chemical and physical properties.
An environmental baseline study was performed covering areas such as water, flora, fauna, hydrogeology, hydrology, climate, landscape, ecosystem characterisation, and socio-economic considerations. This study was used to support the EIA and is being used to monitor any impacts from construction activities and/or operations. Collaborative and community water sampling continues with local communities and provincial regulators.
A physical climate change impact risk study was completed in 2020. Overall, no material climate change risks were identified, and projections will continue to be used to inform project design and operations management.
*Community engagement *
Allkem is committed to regularly engaging with community stakeholders and providing positive, lasting benefits through employment opportunities, local procurement, and educational and health initiatives. As part of a two-year corporate social responsibility program agreed in 2019, the Company funded three projects to support the communities nearest to Sal de Vida. This included the construction of a high school in El Peñón village, expansion of a primary school in Antofagasta de la Sierra and construction of a first aid facility in Cienaga La Redonda. A community office was established in Antofagasta de la Sierra in January 2020. Separately, a social baseline study including a perception test returned positive results about the Company and the Sal de Vida Project.
Since 2021, Sal de Vida has been developing a “Completion of Education” programme that benefits employees of the project, the communities of Ciénaga Redonda and Antofalla. This programme is carried out jointly through an agreement signed with Catamarca Education Ministry. Allkem aims to support local communities by maximising health, wellbeing and the procurement of local goods and services whilst upskilling and providing future employment opportunities.
As of 30 June 2023, over 70% of the local employees are from Catamarca and Stage 1 will create approximately 900 full-time positions in the peak of construction.
Further engagement with the provincial government and stakeholders, including the communities of Antofagasta de La Sierra, continue in relation to project updates.
*Regulations and permitting *
Sal de Vida Stage 1 (15kpta production capacity) is fully permitted after receiving approval from regulators in December 2021 (for 10.7ktpa production capacity) and subsequently in December 2022 (for 15ktpa production capacity, which included an additional third string of evaporation ponds which covers ~150ha). These permits are being used for construction activities which commenced in January 2022 to build the first two strings of ponds, the brine distribution system, additional camp capacity, process plant and non-process infrastructure. In addition, water easements have been issued and a resolution was issued permitting construction of the solar farm.
Stage 2 will require a new EIA approval that will be submitted once the front-end engineering design and technical studies for this stage are completed. A ground water permit is also in place, providing sufficient supply of water for all stages of operations.
*EXECUTION STRATEGY *
*Project Schedule *
SDV Stage 1 pond construction commenced in January 2022. The project has been divided into a number of work packages, namely: well field and brine distribution, evaporation ponds, process plant and utilities, and an energy package.
As of 31 August 2023, construction of the first two string of ponds was completed, and the third string had reached 59% of construction completion. The process plant engineering is at 59%, procurement progress at 63% and construction progress at 9%. Camp construction was also complete with 888 beds available. Long lead equipment procurement is well advanced with the majority of equipment forecast for arrival prior to end of CY23.
Substantial mechanical completion, pre-commissioning and commissioning activities are expected by H1 2025 with first production expected in H2 2025 and ramp up expected to take 1 year.
The schedule change for SdV relates improved understanding of the current execution plan, the ongoing import challenges and delays experienced in country by Allkem and it contractors and vendors as well as an improved understanding of regional productivity factors.
The prefeasibility study update for SDV Stage 2 confirms the expansion will be completed on the same design basis as Stage 1 with a twofold modular replication of the Stage 1 design. Stage 2 construction is anticipated to commence upon receipt of applicable permits and substantial mechanical completion of Stage 1 with Stage 2 first production approximately 2.5 - 3 years thereafter.
*Funding *
Funding is expected to be provided through one or more of the following:
· existing corporate cash;
· existing or new corporate debt or project finance facilities;
· cash flow from operations.
*Offtake Strategy *
Allkem continues discussions with prospective customers. In line with the Project execution schedule, these discussions are expected to advance to negotiations throughout the course of the project. Interest and demand remains strong against the backdrop of a tight market, and Allkem seeks to target high growth regions and determine the optimal contracting arrangement at the time of product qualification.
This release was authorised by Mr Martin Perez de Solay, CEO and Managing Director of Allkem Limited.*Allkem Limited*
ABN 31 112 589 910
Level 35, 71 Eagle St
Brisbane, QLD 4000 *Investor Relations & Media Enquiries*
Andrew Barber
*M: +*61 418 783 701 *E: *Andrew.Barber@allkem.co
Phoebe Lee
*P: *+61 7 3064 3600* E**:* Phoebe.Lee@allkem.co *Connect *info@allkem.co
+61 7 3064 3600
www.allkem.co
*
IMPORTANT NOTICES*
This investor ASX/TSX release (“*Release”*) has been prepared by Allkem Limited (ACN 112 589 910) (the “*Company”* or “*Allkem”*). It contains general information about the Company as at the date of this Release. The information in this Release should not be considered to be comprehensive or to comprise all of the material which a shareholder or potential investor in the Company may require in order to determine whether to deal in Shares of Allkem. The information in this Release is of a general nature only and does not purport to be complete. It should be read in conjunction with the Company’s periodic and continuous disclosure announcements which are available at allkem.co and with the Australian Securities Exchange (“*ASX”*) announcements, which are available at www.asx.com.au.
This Release does not take into account the financial situation, investment objectives, tax situation or particular needs of any person and nothing contained in this Release constitutes investment, legal, tax, accounting or other advice, nor does it contain all the information which would be required in a disclosure document or prospectus prepared in accordance with the requirements of the Corporations Act 2001 (Cth) (“*Corporations Act”*). Readers or recipients of this Release should, before making any decisions in relation to their investment or potential investment in the Company, consider the appropriateness of the information having regard to their own individual investment objectives and financial situation and seek their own professional investment, legal, taxation and accounting advice appropriate to their particular circumstances.
This Release does not constitute or form part of any offer, invitation, solicitation or recommendation to acquire, purchase, subscribe for, sell or otherwise dispose of, or issue, any Shares or any other financial product. Further, this Release does not constitute financial product, investment advice (nor tax, accounting or legal advice) or recommendation, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision.
The distribution of this Release in other jurisdictions outside Australia may also be restricted by law and any restrictions should be observed. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.
Past performance information given in this Release is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.
*Forward Looking Statements*
Forward-looking statements are based on current expectations and beliefs and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause the actual results, performances and achievements to differ materially from any expected future results, performances or achievements expressed or implied by such forward-looking statements, including but not limited to, the risk of further changes in government regulations, policies or legislation; risks that further funding may be required, but unavailable, for the ongoing development of the Company’s projects; fluctuations or decreases in commodity prices; uncertainty in the estimation, economic viability, recoverability and processing of mineral resources; risks associated with development of the Company Projects; unexpected capital or operating cost increases; uncertainty of meeting anticipated program milestones at the Company’s Projects; risks associated with investment in publicly listed companies, such as the Company; and risks associated with general economic conditions.
Subject to any continuing obligation under applicable law or relevant listing rules of the ASX, the Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements in this Release to reflect any change in expectations in relation to any forward-looking statements or any change in events, conditions or circumstances on which any such statements are based. Nothing in this Release shall under any circumstances (including by reason of this Release remaining available and not being superseded or replaced by any other Release or publication with respect to the subject matter of this Release), create an implication that there has been no change in the affairs of the Company since the date of this Release.
*Competent Person Statement *
The information in this report that relates to Sal de Vida’s Exploration Results, Mineral Resources and Reserves is based on information compiled by Michael Rosko, MS PG, and Brandon Schneider, MS PG, both of whom are Competent Persons and Registered Members of the Society for Mining, Metallurgy and Exploration, Inc (SME), a ‘Recognised Professional Organsation’ (RPO) included in a list posted on the ASX website from time to time. Mike Rosko and Brandon Schneider are both employees of Montgomery and Associates and have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mike Rosko and Brandon Schneider consent to the inclusion in this announcement of the matters based on their information in the form and context in which it appears.
The scientific and technical information contained in this announcement has been reviewed and approved by, Michael Rosko, MSc. Geology (Montgomery and Associates) and Brandon Schneider, MSc. Geological Sciences (Montgomery and Associates), as it relates to geology, modelling, and resource and reserve estimates; Michael Gunn, BSc. Chemical Engineering (Gunn Metals), as it relates to processing, facilities, infrastructure, project economics, capital and operating cost estimates. The scientific and technical information contained in this release will be supported by a technical report to be prepared in accordance with National Instrument 43-101 – Standards for Disclosure for Mineral Projects. The Technical Report will be filed within 45 days of this release and will be available for review under the Company’s profile on SEDAR at www.sedar.com.
*Not for release or distribution in the United States*
This announcement has been prepared for publication in Australia and may not be released to U.S. wire services or distributed in the United States. This announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or any other jurisdiction, and neither this announcement or anything attached to this announcement shall form the basis of any contract or commitment. Any securities described in this announcement have not been, and will not be, registered under the U.S. Securities Act of 1933 and may not be offered or sold in the United States except in transactions registered under the U.S. Securities Act of 1933 or exempt from, or not subject to, the registration of the U.S. Securities Act of 1933 and applicable U.S. state securities laws.
*ANNEXURE A*
*ADDITIONAL MINERAL RESOURCE & ORE RESERVE INFORMATION*
*Additional information for the resource estimation*
Diamond drill cores were obtained in the field for both drainable and total porosity. Porosity samples were sealed in plastic tubes and shipped to Core Laboratories in Houston, Texas, for analysis. Depth-specific brine samples were collected from the in-situ formation, ahead of the core bit. Four additional methods were used to obtain brine samples. Brine samples used to support the reliability of the depth-specific samples included analyses of brine centrifuged from core samples, brine obtained from low flow sampling of the exploration core holes, brine samples obtained near the end of the pumping tests in the exploration wells, and brine samples obtained during reverse- circulation air drilling. After the samples were sealed on site, they were stored in a cool location, then shipped in sealed containers to the laboratories for analysis.
Borehole and well spacing is in general about 4 km in most areas, and is consistent with guidelines determined by Houston et al., 2011 for evaluation of brine-based lithium resources in salar-type systems. The drilling density was sufficient to demonstrate a high degree of confidence in the understanding of the location and nature of the aquifer, and brine grade both horizontally and vertically. The Sal de Vida area has been drilled and logged with vertical exploration boreholes and wells.
The Mineral Resource was estimated using the polygon method. To estimate total amount of lithium in the brine, the basin was first sectioned into polygons based on the location of exploration drilling. Polygon sizes were variable. Each polygon block contained one diamond drill exploration hole that was analysed for both depth specific brine chemistry and drainable porosity. Boundaries between polygon blocks are generally equidistant from diamond drill holes. For some polygon blocks, outer boundaries are the same as basin boundaries, as discussed above.
Within each polygon shown on the surface, the subsurface lithologic column was separated into hydrogeologic units. Each unit was assigned a specific thickness based on core descriptions and was given a value for drainable porosity and average lithium content based on laboratory analyses of samples collected during exploration drilling. Correlation between depth and lithium concentration in the brine was observed further increasing confidence in the method. The computed resource for each polygon was the sum of the products of saturated hydrogeologic unit thickness, polygon area, drainable porosity and lithium content.
A cut-off grade of 300 mg/L of lithium was used. Hydrogeologic units within each polygon with lithium content less than cut-off grade were not included in the lithium Mineral Resource calculations. The Mineral Resource computed for each polygon is independent of adjacent polygons, but adjacent borehole geology was used to confirm stratigraphic continuity of the units surrounding each borehole.
Mining methodology ultimately would be via well pumping in areas identified as favourable for brine extraction. An on-site pilot plant demonstrated the ability to extract the lithium from the brine.
Drilling information from the production well extensions have resulted in the increased depth of the basement model and have increased the volume of the lithium brine hosting aquifer. Locations of all drill holes used for the estimation is shown in in the table below.
*Table 2: Location of drill holes*
*Hole ID* *Easting (m)* *Northing (m)* *Elevation (masl)* *Depth (m)* *Drilling Method* *Azimuth* *Dip*
SVH10_05 3,401,501 7,187,997 3,967 51 Diamond -90^o
SVH10_06 3,407,698 7,198,544 3,966 109.21 Diamond -90^o
SVH10_07 3,405,096 7,200,713 3,972 110.60 Diamond -90^o
SVH10_08 3,412,000 7,198,004 3,970 136.10 Diamond -90^o
SVH10_09 3,404,610 7,192,659 3,969 116.17 Diamond -90^o
SVH10_10 3,402,046 7,192,921 3,967 114.76 Diamond -90^o
SVH10_11 3,401,991 7,200,980 3,969 102.35 Diamond -90^o
SVH10_12 3,404,945 7,194,862 3,968 112.72 Diamond -90^o
SVH10_13 3,399,997 7,192,002 3,966 135.37 Diamond -90^o
SVH10_14 3,397,992 7,193,440 3,966 145.15 Diamond -90^o
SVH11_15 3,403,401 7,190,002 3,969 149.00 Diamond -90^o
SVH11_16 3,411,992 7,191,599 3,974 171.23 Diamond -90^o
SVH11_24 3,401,757 7,190,453 3,967 195.54 Diamond -90^o
SVH11_25 3,406,876 7,193,763 3,970 155.77 Diamond -90^o
SVH11_26 3,402,708 7,196,334 3,966 139.09 Diamond -90^o
SVH11_27 3,409,861 7,192,435 3,973 137.31 Diamond -90^o
SVH11_28 3,409,188 7,196,108 3,969 95.62 Diamond -90^o
SVH11_28 3,409,188 7,196,108 3,969 95.62 Diamond -90^o
SVWP21-01 3,411,502 7,195,299 3,972 240 Rotary -90^o
SVWP21-02 3,412,559 7,194,884 3,973 307 Rotary -90^o
SVWP21-03 3,411,664 7,194,301 3,974 202 Rotary -90^o
SVWP21_04 3,412,788 7,193,901 3,973 236 Rotary -90^o
SVWP21_05 3,411,643 7,193,289 3,973 212 Rotary -90^o
SVWP21_06 3,412,771 7,192,906 3,974 267.7 Rotary -90^o
SVWP21_07 3,411,663 7,192,303 3,974 250 Rotary -90^o
SVWP20_08 3,412,781 7,191,991 3,976 307 Rotary -90^ o
Note: Easting and Northing shown using Gauss Krüger coordinate system, Posgar 94 datum. masl = meters above sea level.
*Additional information for the Ore Reserve estimation*
The methodology used to develop the estimated resources, is different to the methodology used to estimate the reserves, but consistent with the informal guidelines for lithium brines developed by Houston et al., 2012. Their document provides informal guidelines for estimation of Brine Mineral Resources and Brine Ore Reserves, and their methodology is consistent with industry standards for characterisation of aquifers and wellfields.
The document states that key variables, “hydraulic conductivity, recovery, brine behaviour and grade variation over time, etc. and fluid flow simulation models” are considered when estimating the Brine Reserve and determining economic extraction. Given the nature of brine, the same guidelines regarding well spacing and grade cannot be applied as if the deposit was a stationary (i.e. static) orebody. The guidelines regarding lithium brine deposits, as suggested by the Ontario Securities Commission (2011), were considered acceptable and applied by Montgomery during construction of the groundwater flow model used to estimate the reserve.
Where previous methods were used to estimate the total amount of brine, and therefore lithium in storage that could be theoretically drained in the entire mining concession, the method used for reserve estimation is completely different and focuses on the potential for retrieval of lithium via wellfield pumping in selected areas where pumping at relatively large abstraction rates have been demonstrated. As the brine is a mobile fluid, it is necessary to use a calibrated numerical groundwater flow model, respective of fluid density, to project future wellfield production and projected future brine grade.
Due to various levels of uncertainty in conceptualising any hydrogeological system, all groundwater flow and transport models incorporate inherent uncertainty. To lessen the effects of uncertainty, good model calibration to observed field conditions is essential for judging confidence in model projections. However, even with reasonable short-term model calibration to 30-day, hydraulic testing of the brine aquifer that was conducted in late 2012 and in 2020, long-term model projections are less certain because of outstanding variables. These variables include locations of aquifer boundaries, lateral continuity of key aquifer zones, presence of fresh and brackish water that have the potential to dilute the brine in the wellfield area, and the uniformity of aquifer parameters within specific aquifer units. Although the numerical model was constructed to be reasonably conservative when data are scarce or assumed (i.e., law of parsimony), there is always a level of uncertainty associated with projections of long-term outcomes. Therefore, it is appropriate to categorise the pumping from the first seven years of pumping at each wellfield as a Proved Brine Ore Reserve. Although projections of long-term pumping past the first seven years from the wellfields are less certain. There is a reasonable understanding of the hydrogeological system that over the long-term the projected pumped brine can be categorised as a Probable Brine Ore Reserve for the remaining 33 years of pumping at each wellfield.
It is standard in the industry to recalibrate and update numerical groundwater models after start-up and during operation of the production wellfields. As the wellfields are pumped, long-term data for pumping rates, water levels, and brine chemistry are generated; calibration to these new data will improve the reliability and predictive capabilities of the model. Future Probable Ore Reserve estimates may also be modified based on production pumping results, and projections from the recalibrated model may result in confidence category upgrades of Probable Brine Ore Reserves to Proved Brine Ore Reserves.
*Statement of Brine Ore Reserves*
The groundwater model simulates concentrations of TDS, which are used to derive concentrations of lithium by linear relationships developed for each wellfield. It is assumed that the relationship between TDS and lithium content is constant during 40-year period of brine production from the East and Southwest wellfields. In this manner, the concentrations of lithium on model projections of TDS in the brine produced from pumping wells in each production wellfield are estimated.
Using the numerical groundwater flow model projections, total lithium to be extracted from the proposed Southwest and East wellfields was calculated for a total period of 40 years, considering the two stages of the project, and taking into account that each wellfield will be pumping for 40 years with a gap of two years between wellfields (Stage 1 East and Stage 2 Expansion). The model projections used to determine the Brine Ore Reserve that assumed increasing pumping from both wellfields, indicate that the proposed wellfields should be able to produce a reliable quantity of brine at an average annual rate of approximately 315 L/s in the case of the eastern wells and about 191 L/s in the case of southwestern wells. The average grade at start-up calculated from the initial model simulations used to estimate the Brine Ore Reserve is expected to be about 805 mg/L of lithium in the Stage 1 East Wellfield and 815 mg/L for the southwest wells of Stage 2; the average final grade after 40 years of pumping is projected to be approximately 750 mg/L of lithium (considering all wellfields) due to dilution. Depending on how the wellfields are ultimately operated, these rates and grades may be different.
Using the groundwater model, the average TDS content of brine was estimated for each pumping cycle for each wellfield. After estimating the total lithium content for each time step and summing the amounts of lithium projected to be pumped during those time steps, a total mass of unprocessed lithium to be pumped from the wellfields was estimated. The results are summarised in Table 12.
*Table 3: Summary of total projected LCE pumped during 40 years of wellfield operations.*
Time Period Years Active Wellfield Lithium Total Mass
(Tonnes) Li[2]CO[3] Equivalent
(Tonnes)
1 1-2 Stage 1 East 8,052 42,857
2 3-40 Stage 2 Expansion 459,002 2,443,173 *Total* 467,054 2,486,030
Total mass values in 1,000-kilogram units (tonnes) of lithium were then converted to LCE units using 5.3228 as the conversion factor. Therefore, the amount of lithium in the brine supplied to the ponds in 40 years of pumping is estimated to be about 2.48 Mt LCE.
Modelling results indicate that during the 40-year pumping period, brine will be diluted by fresh and brackish water, so the pumping rates increase slightly with time, to meet the anticipated LCE tonnes per year for each wellfield.
During the evaporation and concentration process of the brines, there will be anticipated losses of lithium. The total amounts provided in Table 12 do not include anticipated loss of lithium due to process losses and leakages after brine is pumped to the evaporation ponds. The amount of recoverable lithium from the various processing phases is calculated to be 70% of the total brine supplied to the ponds.
ANNEXURE B
*JORC Table 1 – Section 1 Sampling Techniques and Data related to Sal de Vida (SDV) exploration drilling *(Criteria in this section apply to all succeeding sections.)
Criteria JORC Code explanation Commentary
Sampling techniques · Nature and quality of sampling (eg cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc). These examples should not be taken as limiting the broad meaning of sampling.
· Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used.
· Aspects of the determination of mineralisation that are Material to the Public Report.
· In cases where ‘industry standard’ work has been done this would be relatively simple (eg ‘reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay’). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (eg submarine nodules) may warrant disclosure of detailed information.
· Drainable porosity and brine sampling was conducted at accredited laboratories. Drill cuttings were described and stored in labelled plastic cutting boxes onsite. Sampled wells include diamond drillholes (for the analysis of drainable porosity and brine chemistry) as well as reverse circulation wells (to analyze brine chemistry). Core was described at 1-m intervals. Downhole geophysical logging was completed for the Phase 2 to Phase 5 programs, and consisted of gamma ray, resistivity, spontaneous-potential surveys, and borehole magnetic resonance and spectral gamma ray.
· Neither porosity (core) nor chemistry (brine) samples were subjected to any further preparation prior to shipment to participating laboratories. After the samples were sealed on site, they were stored in a cool location, and then shipped in sealed containers to the laboratories for analysis.
· Brine samples were handled by experienced geoscientists with a rigorous QA/QC program in place. An accredited laboratory was selected as the primary laboratory to assay the brine samples, and 5 secondary QA/QC labs were used throughout the drilling programs.
· -For drainable porosity sampling, Full diameter core with no visible fractures was selected and submitted for laboratory analyses. The selected sleeved core samples were capped with plastic caps, sealed with tape, weighed, and stored for shipment. The typical sample length was 15 – 40 cm.
-Brine samples were collected by drive-point samplers, centrifuge to confirm the drive-point sampling methodology, low-flow pumping and directly collected from the discharge line near the end of each pumping test for reverse circulation wells.Drilling techniques · Drill type (eg core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc) and details (eg core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc