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Prospect further improves economics for Arcadia lithium project in Zimbabwe

Prospect Resources Ltd.'s updated definitive feasibility study for its 87%-owned Arcadia lithium project in Zimbabwe outlined a post-tax net present value, discounted at 10%, of US$645 million, a 70% internal rate of return, and a 1.5-year payback period.

The base case development of a 2.4-million-tonne-per-annum operation was estimated to cost US$162 million, including a 14% contingency. Sustaining capital was estimated at US$35 million.

The open-pit mine is expected to annually produce 173,000 tonnes of spodumene and 122,000 tonnes pf petalite during a 15.5-year life.

The study confirmed Arcadia to be a high-margin project with forecast life-of-mine revenue of US$3.42 billion and average annual EBITDA of US$114 million.

The updated study further boosts the project economics, which improved in March after Prospect selected high pressure grinding rolls as a viable option in its processing design, which upgraded the NPV, discounted at 10%, to US$533 million, and trimmed capex to US$163 million.

The company said Dec. 12 that it entered a definitive off-take deal with Sinomine Resource (Hong Kong) International Trading Co. Ltd., agreeing to supply 280,000 tonnes of spodumene concentrate and 784,000 tonnes of petalite concentrate over seven years.

The agreement covers 42% of Arcadia project's production over the first seven years of operation.

As part of the deal, Sinomine agreed to pre-pay US$10 million upon delivery of the ball mill and installment of the bolt during the project's construction phase.

Separately, ROSATOM subsidiary Uranium One Group JSC entered a memorandum of understanding with Prospect to negotiate equity investment and off-take of at least 51% of the latter's future lithium production.

Uranium One will receive a 90-day exclusivity period to complete due diligence on the company and the Arcadia project.