European Lithium's PFS shows Wolfsberg's economic viability and demonstrates upside
11:40 05 Apr 2018
The resource metrics and mine program that will be used in the DFS could result in a higher valuation being attributed to the project.
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The accelerated case appears to be supported by implied valuations with an NPV8 of about $442 million
European Lithium Ltd's (
ASX:EUR) (FRA
F8) (VSE:ELI) pre-feasibility study (PFS) on its Wolfsberg Lithium Project in Austria demonstrates significant upside.
Results confirm the technical and economic viability of the project, but another scenario emerged which would see larger production over a longer life.
This would result from further drilling to move 5 million tonnes to the indicated category in order to boost mine life, further supported by results from drilling in Zone II.
Drilling to upgrade resource
A drilling program to convert this resource has been developed and submitted to the mining authority for approval.
European Lithium chairman Tony Sage said: “Completion of the PFS, which establishes the technical and economic viability of the Wolfsberg Lithium Project, is a major step in its development.
“The PFS outlines the development of an underground mine producing, in the base case, an average of about 620,000 tonnes per annum Run of Mine (RoM).”
DFS could be a game changer
Sage said: “The company will endeavour to formally start a definitive feasibility study (DFS) in July with the aim of completing it before the end of 2018.”
The resource metrics and the mine program that will be used in the DFS could indicate a project with a much higher value.
However, during the development of the mine plan, it became evident that an accelerated development which would achieve increased output was viable, improving the economic outcomes.
Consequently, this accelerated case is arguably the key takeaway, particularly given that it should better reflect the likely outcome of the definitive feasibility study (DFS).
Management ascertained that with little extra equipment and improved scheduling the mining rate could be increased to about 720,000 tonnes per annum.
Accelerated case includes 20% increase in processing rate
Opting for the accelerated case appears to be well supported by implied valuations with an NPV8 of about $442 million comparing favourably with the base case of $343 million.
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It is important to note that the PFS is based only on the current measured and indicated resource of 6.3 million tonnes at 1.17% Li
2O.
The accelerated case results in the measured and indicated resources of the base case being mined and processed in 10 years rather than 12.
The 20% increase in processing rate results in lithium hydroxide monohydrate production increasing from an average of about 8,400 tonnes per annum to an average of about 10,130 tonnes per annum.
Potential to increase to production of 800,000 tonnes per annum
The mine design consultant concluded that mining rates could be further increased to about 800,000 tonnes per annum which will probably be the upper limit for efficient mining.
However, this will require additional indicated resources to support the higher mining rate and increase the mine life which should increase the NPV of the project further.
On this note, it is possible that promising drilling results from Zone II of the deposit, which haven’t been taken into account in the PFS, could support higher production rates over a longer mine life.
Further drilling in Zone II was undertaken between January and March with all five holes drilled showing numerous pegmatite intersections.
READ: European Lithium hits 10-metre intersection in Zone II, nearly double the widest intersection of Zone I
Assay results are anticipated in mid-April following which a maiden resource in Zone II should be declared.
The aim is to have increased measured and indicated resources for the DFS so that the project can be designed and evaluated at a mining rate of about 800,000 tonnes per annum.
Right place, right time
The company is on track to become a major supplier to an integrated lithium industry in Europe.
This is a region where motor vehicle manufacturers are accelerating electric vehicle (EV) production and lithium battery plants are under construction or being planned.
With these developments have strong national government and European Commission support, the Wolfsberg project is ideally situated.
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