KALGOORLIE (miningweekly.com) – Lithium developer Liontown Resources is confident that it can execute its Kathleen Valley project, in Western Australia, within the set timeframe and within the new budget.
The miner at the end of June took a final investment decision on the Kathleen Valley project, but flagged a cost increase in the project from the A$473-million estimated in the 2021 definitive feasibility study (DFS) to A$545-million.
The increase is driven primarily by optimisation and expansion of the front-end engineering design (FEED) scope across a range of areas and general cost escalation.
Speaking at the last day of the Diggers and Dealers conference, Liontown MD and CEO Tony Ottaviano said that the company was confident that it could maintain its production start target of the second quarter of 2024.
“We've allowed for escalation. Our FEED and our DFS were done during the hottest part of the market. We believe we factored in reasonable escalation into our capital costs to give us the new figure of A$545-million.
“We will also back ourselves through the management's capability, innovation and thinking. Where it has made sense to apply escalation we have, but equally, we want to make sure that the shareholders are getting the very best out of the management team, and we're going to deliver something that we can. It would have been easy for me to pad this up by another 30% and blow the schedule out and blame Covid, but we're gonna back ourselves,” said Ottaviano.
The 2.5-million-tonne-a-year Kathleen Valley operation will produce 500 000 t/y of spodumene concentrate, and in year six of operations, Liontown will look to increase the project capacity to four-million tonnes a year, delivering 700 000 t/y of spodumene concentrate.
Based on this production scenario, the Kathleen Valley operation is expected to have a mine life of 23 years, and will generate life-of-mine free cash flows of A$12.2-billion.
Liontown is fully funded for the construction of Kathleen Valley with a A$300-million debt facility with automotive major Ford, and following a A$463-million capital raise at the end of last year.
Ford also inked a 150 000 t/y spodumene concentrate offtake agreement with Liontown, for an initial period of five years, adding to offtake agreements from Tesla and LG Energy Solutions, which means that offtake at Kathleen Valley now stands at 450 000 t/y of spodumene concentrate, representing 90% of the start-up production capacity.
Ottaviano said that Liontown’s main focus was on the delivery of the Kathleen Valley project, but once this had been completed, the company’s focus would shift to downstream opportunities.
“At the same time, besides building Kathleen Valley we have kicked a prefeasibility study (PFS) around downstream potential, and we'll continue to prosecute the PFS at a slower cadence because the focus needs to be Kathleen Valley, but we're getting tremendous inbound interest from customers and other third parties around participating in that downstream strategy,” Ottaviano said.
He noted that being a "second mover" in the downstream sector would offer significant opportunity for Liontown.
“Today there is a wealth of experience being built in the West Australian engineering fraternity, with three refineries being built for commission at the moment. By the time we get to that point, we believe we will have access to those valuable resources and we will get the benefit of the learnings that these people have had through building and commissioning it.”
Ottaviano said that Liontown was likely to partner in the downstream processing opportunity, and would bring in a partner that would not only provide capital, but expertise.
“We are getting tremendous inbound expressions of interest on the downstream. When you have a resource that has a 23- to 25-year mine life, it can underpin the capital required to build the downstream refinery. But we also understand our limitations. We want to bring in people that can do two things for us; bring a balance sheet, but more importantly, bring know-how so that we can work on it together and utilize their know-how and our quality resource.”
Ottaviano said that the downstream PFS would focus on not only the location of the proposed downstream facilities, but also on the ultimate product to be delivered through the process.
“Whether that chemical is hydroxide or an intermediary product that's part of the PFS, and whether we located the plant next to the site in Geraldton or Kalgoorlie, that'll be part of the PFS.
“However, an intermediary product brings benefits: lower capital costs, no shelf life on the product and we don't have to get that qualification for battery grade. And then we might build finishing plants with our partner in strategic locations around the world. And we would be transporting almost a fully formed product,” said Ottaviano.