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Kidman values integrated Mount Holland joint venture with SQM at US$2.2B


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Kidman values integrated Mount Holland joint venture with SQM at US$2.2B

Kidman Resources Ltd. said Dec. 18 that an integrated pre-feasibility study for the Mount Holland lithium joint venture in Western Australia with Sociedad Quimica y Minera de Chile SA, or SQM, outlined a posttax net present value, discounted at 10%, of US$2.2 billion, a 26.6% internal rate of return, and a three-year payback period.

Separate studies on the Kwinana lithium refinery with the proposed Mount Holland open pit mine and concentrator were streamlined under the updated study.

The study assumed a lithium hydroxide, or LiOH, price of US$15,115 per tonne over an estimated 47-year mine life, with the price pegged at US$14,074/t over the first 10 years.

The integrated study also took into account a maiden proved and probable ore reserve at the Earl Grey deposit of 94.2 million tonnes grading 1.5% lithium oxide.

Capital expenditure, including contingencies, is now pegged at US$737 million, down from US$755 million. Excluding contingency, capex is forecast at US$609 million, from US$601 million previously.

Annual production is projected at 45,254 tonnes of LiOH with Kidman's share at 22,627 tonnes, at a C1 cash operating cost of US$4,507 per tonne of LiOH, net of byproducts and excluding government royalties.

The operating cost over the mine's life is now pegged at US$264 per tonne of concentrate, from US$299 per tonne.

Covalent Lithium Pty. Ltd., the joint venture management entity held by Kidman and SQM on a 50/50 basis, expects to make a final investment decision for the project in the first half of 2019, shortly after completing a definitive feasibility for the operation.

Kidman is advancing discussions for potential off-take deals, which aims to secure binding contracts for approximately 75% of its share of LiOH production, or about 22,600 tonnes per annum of LiOH. It previously signed off-take deals with Mitsui & Co. Ltd. and Tesla Inc. for the supply of lithium produced from the Mount Holland operation.

In addition, the Australia-listed explorer advanced discussions with traditional financiers and is evaluating the most appropriate way to fund its project capex share, consistent with its strategy to maximize debt financing and minimizing equity contribution for the project.

Earlier this month, Kidman reached a settlement with private company Phoenix Rise and a retired geologist over a case that could have delayed the development of the Mount Holland joint venture.