Lithium Universe on spodumene hunt to feed Canadian lithium refinery
Lithium Universe is on the hunt for a minimum 10 years' worth of spodumene supply from local producers to feed its future Bécancour Canadian lithium refinery. The company expects to kick-start the conversion of the battery mineral into battery-grade lithium carbonate at the refinery in 2028.
The company is targeting a non-binding agreement to source the large supply to appease financiers and help lock in its required project finance, having reached a final investment decision earlier this year for the project to begin kicking into gear.
Initially it plans to source 56,000 tonnes of SC6-grade spodumene material, comprising 6 per cent lithium oxide, to fire up its conversion facility in 2028. That will increase to 98,000t in 2029 and reach the refinery's full capacity of 140,000t from 2030 onwards.
Lithium Universe will seek the feedstock material preferably from local Canadian producers or near-term developers, otherwise it may look to procure its required supply from a producer within the North Atlantic region, including Brazil and Africa.
Sourcing local material presents obvious logistical advantages, particularly significant savings in transport costs and potential tariffs imposed by the Canadian government on export material from countries including China.
Lithium Universe says many producers see the benefits in dealing with a local converter. Savings of US$100 (A$155) per dry metric tonne of spodumene could equate to a reduction of about US$800/t in converted lithium carbonate product costs.
Canada charges a 25 per cent import tariff on all Chinese lithium chemicals brought into the country, so local conversion of the battery mineral could represent significant savings to end-users.
Under the company's recently revealed definitive feasibility study, it proposes pumping out an impressive 18,270t of battery-grade lithium carbonate when its processing operations have fully hit their stride by 2030. Production will support the expansion of Canada's electric vehicle and energy storage industries.
Lithium Universe plans to purchase the spodumene feedstock from the market at benchmark prices and retain full ownership of lithium carbonate converted product.
It intends to sell on the open market or directly to an original equipment manufacturer, which ideally it hopes to source as an investor into the project in exchange for an offtake supply of the battery ingredient. It is not looking to toll treat any spodumene material.
Management says its mission is to close what it terms the 'lithium conversion gap', where an expected 20-plus major manufacturers plan to deploy 1000 gigawatts of battery capacity by 2028, with demand for 850,000t of converted lithium product. It anticipates only a potential 100,000t of lithium carbonate hard rock converters will be constructed by that timeframe.
The Bécancour refinery will implement a smaller, off-the-shelf model refinery in preference to larger, more difficult-to-operate plants. Its initial focus will be on producing lithium carbonate to feed the lithium-iron-phosphate batteries used in electric vehicles.
Lithium Universe's board approved a final investment decision on the Bécancour lithium refinery after its completed definitive feasibility study delivered a net present value of US$718M (A$1.109 billion). Based on the study results, it will aim to secure US$549M (A$848M) in funding to construct the facility.
Lithium Universe expects to generate an EBITDA of US$148M (A$228.5M) from an annual revenue of US$383M (A$592M) over a 3.9-year payback based on the study's price assumptions. The assumptions are higher than current lithium spot prices.
The company says the refinery will generate a 21 per cent internal rate of return, based on forecast prices of US$1170 (A$1807) per tonne of spodumene concentrate consisting of 6 per cent lithium content and US$20,970/t of lithium carbonate.
Actual spot prices for battery-grade lithium carbonate hover near US$7500/t.
The break-even cost is estimated at US$14,000/t for lithium carbonate on the expectation it will produce 18,270 tonnes per annum of battery-grade lithium carbonate.
With expectations that lithium pricing will improve in the coming 12-18 months as the supply and demand balance improves, management believes its financial modelling shows the company has a compelling and economically viable project on its hands.
If the management team can lock in the bucketload of spodumene it requires to convince project financiers to back it and jump on board, the project could be on its path to playing an important part in the Canadian electric vehicle battery market's future.
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