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Prospect Resources updated DFS, updated but is it improved?

Prospect Resources Ltd (ASX: PSC) has completed an updated definitive feasibility study (DFS) and signed an MoU with Uranium One for offtake and potential equity investment.

The memorandum of understanding (MOU) with Uranium One Group JSC, gives Uranium One a 90-day exclusivity period to complete its due diligence. If Uranium One opts to proceed it can negotiate an equity investment into Prospect, or its subsidiaries and off-take for at least 51% of potential future production.

In this article, we compare the updated DFS for Prospects 87% owned Arcadia Igneous Lithium Project, in Zimbabwe, to the previous DFS and the figures produced by Prospects peer group.

While the updated DFS is based on a 2.4mt per annum plant, in line with the previous DFS, announced in November 2018, the average annual product production rate is reduced by 22% to 173,000t for spodumene concentrate from 212,000t in the November 2018 DFS. Petalite production is reduced by 43.5% to 122,000t per annum from 216,000t per annum previously. This moves the project from the large-scale concentrate production range to the mid-scale concentrate production range compared to its peer group.

The capex in the updated DFS has reduced by 1.8% to US$162m from US$165m in the November 2018 DFS. As a result, the life of mine capex intensity increased by 9% to US$35/t from US$32/t, which remains in the mid-range of its concentrate producing peer group.

Opex has increased by 20.7% to US$344/t in the updated DFS from US$285/t in the November 2018 DFS, which moves the project from the low end of the cost curve to the upper end of the cost curve compared to its concentrate producing peer group.

While mine life in the updated DFS increases by 29% to 15.5 years from 12 years the November 2018 DFS.

The post-tax NPV10 improves by 40.8% to US$645m from US$458m in the November 2018 DFS. While the post-tax IRR increases by 84.2% to 70% from 38%.

In summary capex intensity and opex have both gone up, while production levels have gone down and mine life gone up. This leaves us begging the question: How can the NPV and IRR have improved?

Well the answer is simple; while the spodumene price used has increased marginally by 1.7% to US$701/t from US$689/t, the average life of mine petalite concentrate price increased substantially by 77.9% to US$813/t from US$457/t.

But is there any justification for such a dramatic improvement in the petalite priceRead More – Source

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