PERTH (miningweekly.com) – A definitive feasibility study (DFS) into the Kathleen Valley lithium/tantalum project, in Western Australia, has confirmed the project’s potential, while an updated scoping study on a downstream operation confirmed a value pathway for ASX-listed Liontown Resources.

The Kathleen Valley DFS estimated that the project would require an initial capital investment of A$473-million to support a 2.5-million-tonne-a-year operation, producing 500 000 t/y of spodumene concentrate.

During year six of the operation, a further A$66-million investment would be made to increase the project capacity to 4-million tonnes a year, delivering 700 000 t/y of spodumene concentrate.

Based on this production scenario, the Kathleen Valley operations is expected to have a mine life of 23 years, and will generate life-of-mine free cash flows of A$12.2-billion. The DFS estimated a post-tax net present value (NPV) of A$4.2-billion and an internal rate of return (IRR) of 57%, with a payback period of 2.3 years.

The DFS results compared with the 2020 prefeasibility study (PFS), which had estimated that the mining project would require a capital investment of A$325-million to support a two-million-tonne-a-year operation, and would generate a post-tax NPV of A$1.12-billion and an IRR of 37%, with life-of-mine free cash flows of A$4.8-billion.

“The completion of the DFS marks a major step towards Liontown becoming a substantial global lithium producer and, together with the updated downstream scoping study also released today, lays very strong foundations for our aspiration to become a world-class battery materials company,” said Liontown CEO and MD Tony Ottaviano.

“At the initial planned production rate of 500 000 t/y of spodumene concentrate, Liontown will represent 5.7% of the world spodumene market and 4% of the lithium market on a lithium carbonate equivalent (LCE) basis, with a project that has been conservatively designed to incorporate realistic capital and operating cost assumptions that take current market conditions into account.

“Importantly, the increased capital estimate of A$473-million delivers an optimised and much larger initial project when compared to the 2020 PFS. It also takes into consideration the cost inflation currently seen in the resources industry and incorporates upfront allowance for several key items of plant and equipment. This will allow us to scale up rapidly to four-million tonnes a year throughput and 700 000 t/y spodumene concentrate production in year six. That is a compelling and attractive growth pathway that will see Kathleen Valley very quickly grow to become a top-five global producer in LCE terms.

“The DFS also applies independently sourced long-term pricing assumptions which we believe establishes the project on a very firm footing while retaining exposure to the huge upside of spot lithium pricing, which is currently significantly higher than the assumed weighted price of $1 392/dmt free on board.”

First production from Kathleen Valley is expected in the first half of 2024, a full year earlier than originally planned in the PFS.

Meanwhile, Liontown on Thursday also reported that the updated downstream scoping study at the Kathleen Valley project had confirmed the value of a staged-built, integrated mining, processing and refining operation based on the production of batttery grade lithium hydroxide monohydrate (LHM) using spodumene feedstock from Kathleen Valley.

The scoping study had estimated a capital cost of A$2-billion for the spodumene plant and a three-train 90 000 t/y refinery, producing 29 000 t/y of LHM per train.

The downstream operation is estimated to have a post-tax NPV of A$9.6-billion and an IRR of 56%, and will generate free cash flows of A$32.4-billion over its 23-year operating life.

“The compelling logic and exceptional financial returns associated with Liontown pursuing a downstream value-adding strategy through integrating the mine concentrator and refinery at Kathleen Valley opens up a truly exciting future for Liontown,” said Ottaviano.

“Having a clear pathway not only to produce 6% spodumene concentrate at Kathleen Valley but also to participate more substantively in the battery value chain gives Liontown an outstanding position from which to plan our future as a leading integrated global battery materials company.

“The integrated mining concentrate production and refining approach clearly realises much greater value for Kathleen Valley and, importantly, for our stakeholders. As is the Liontown way, we will continue to adopt a disciplined approach to test work, piloting and design, which is evidenced-based.

“Initial precursor test work suggests the Kathleen Valley concentrate is very well suited for upgrade to a refined downstream product, which means that we can now pursue the PFS for the downstream project.”