AVZ Minerals Ltd (ASX:AVZ) is trading higher after a positive definitive feasibility study (DFS) confirmed robust economics for the Manono Lithium and Tin Project in the Democratic Republic of Congo.
As well as confirming strong project metrics, the DFS provides a higher level of confidence with respect to engineering design, construction requirements, logistics, project finance and risk assessments.
These metrics based on 100% project ownership include:
- US$2,348 million pre-tax NPV10 and US$1,028 million post-tax NPV10;
- Internal Rate of Return of 53% (pre-tax) and 33% (post-tax);
- Net Profit After Tax – Life of Mine of US$3,779 million; and
- Payback period of 1.5 years (pre-tax) and 2.25 years (post-tax).
AVZ currently holds 60% of the project and has an option to increase to 65%.
"Very robust project"[hhmc]
AVZ managing director Nigel Ferguson said: “The DFS proves the Manono Lithium and Tin Project to be a very robust project with strong financial metrics, demonstrated by the key metrics of the DFS base case scenario on a 100% ownership basis.
“The Manono project has a substantial ore body capable of extending the Life of Mine well past the current 20 years, as modelled.”
Shares have been as much as 22% higher to an intra-day high of 7.3 cents, up from 4.5 cents at close on March 23.
The DFS is based on ore reserves of 44.6 million tonnes in the proved category and 48.5 million tonnes in the probable category with an average grade of 1.65% lithium oxide.
This underpins the projects life of mine beyond 20 years and the estimated 4.5 million tonnes per annum operation.
Conventional open pit mining is planned with a low ore waste strip ratio of 1:0:48.
Processing plans[hhmc]
The DFS assumes a product mix of spodumene concentrate (SC6) for 700,000 tonnes per annum and Primary Lithium Sulphate (PLS) for 46,000 tonnes per annum.
The processing flow sheet shows lithia recoveries of 60% using dense medium separation and also allows for the recovery of tin and tantalum from hard rock ore as well as smaller amounts of alluvial tin and tantalum secured from local artisanal miners.
Ferguson said: “The Manono project economics are enhanced by addition of the high value-added Primary Lithium Sulphate product.”
In 2019 the company commissioned a marketing report by Roskill which projected an increase in lithium concentrate prices in line with demand.
Ferguson said: “The project is also highly sensitive to market pricing of SC6.
“Roskill has stated its 20-year price forecast sees an increase in unit value as demand increases and as such, the project becomes incrementally more robust and profitable.”
Breakdown of construction capex.
Financial outlook[hhmc]
Average EBITDA for the life of the mine is US$380.
The project has a capex of US$545.5 million which includes a 10% contingency of US$49.59 million, and a further sustaining capital of US$92 million required over the life of the mine.
This pre-production capital expenditure includes transport upgrade and rehabilitation of the Mpiana Mwanga Hydroelectric Power Plant and construction of the ROM pad.
Ferguson said: “We have intentionally been conservative in our interpretations of financial impacts on the project and therefore believe these numbers can be improved in the future, despite having included significant, non-project infrastructure items such as rehabilitation of roads, the Mpiana Mwanga Hydroelectric power plant and taken an adverse opinion on any potential VAT refund, amounting to some US$658 million over the Life of Mine, which has been totally excluded from the cash flow.”
Due to the location of the mine in the DRC, the cashflows are also sensitive to the transport costs which accounts for 46% of the total operating costs of the project.
Cost-effective transport[hhmc]
The company has finalised and priced two preferred routes which service the east and west coast of Africa.
Transport to the Lobito port in Angola is estiRead More – Source
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