PERTH (miningweekly.com) – A definitive feasibility study (DFS) into the Pilgangoora lithium/tantalum project, in Western Australia, has revealed positive economics for a base case two-million-tonne-a-year operation.

Owner Pilbara Minerals said on Tuesday that the base case scenario would deliver production of 314 000 t/y of 6% spodumene concentrate and 321 000 lb/y of tantalite.

The project is expected to generate a revenue of some A$9.23-billion over its 36-year mine life, and an earnings before interest, taxes, deprecation and amortisation (Ebitda) of A$4.22-billion. The DFS estimates that the project will have a net present value of A$709-million and an internal rate of return of 38.1%.

Capital costs for the project have increased from the A$184-million considered in the prefeasibility study (PFS), to A$241-million, owing to upfront investment to facilitate future substantial project growth, and to support improved lithium and tantalum recoveries.

Pilbara Minerals CEO and MD Ken Brinsden on Tuesday described the completion of the DFS within just six months of the PFS as a "huge achievement", which placed Pilbara Minerals on track to become Australia’s next major lithium producer and a key player in the rapidly changing global lithium landscape.

“The DFS results show a significant improvement in several key areas compared with the PFS, including a significant increase in the project’s net present value (NPV) and internal rate of return (IRR), combined with more accurate estimates of capital and operating costs.

“What stands out from the vast amount of work that has been completed as part of the DFS is the exceptional technical, economic and financial fundamentals of the Pilgangoora project, which is without doubt the world’s leading lithium development project, characterised by the scale, grade and quality of the resource, its low forecast operating cost and its scalability.”

Brinsden noted that given the significant increase in the resource and reserve base at the project over the course of the year, Pilbara Minerals also completed a PFS to assess the potential doubling of production to four-million tonnes a year, during the third year of operations, as an expansion option.

The expansion PFS found that a capital injection of A$128-million would be required to double production, with life-of-mine average production rates reaching 564 000 t/y of 6% spodumene concentrate and 579 000 lb/y of tantalite.

The expanded production would increase the Pilgagoora project’s projected Ebitda to A$245-million, while the project’s NPV would increase to A$1.16-billion and the IRR to 46.3%.

Brinsden said that in the interest of achieving an orderly entry of the Pilgangoora product into the market, the project would start at the base case level of two-million tonnes a year.

“However, we are confident that the growth in the market is such that we should be able to fast-track the expansion option after further engineering studies and market analysis. With this in mind, the company has decided to commit to some modest strategic upfront capital investment as part of the initial production phase to support future expansion.”

Construction at Pilgangoora is expected to start in 2017, with plant commissioning earmarked in late December of that year.