Kindersley PEA outlines strong economic case for lithium project
Shares of Grounded Lithium rose Wednesday (TSXV: GRD; US-OTC: GRDAF) on the release of a preliminary economic assessment (PEA) for its Kindersley project in western Saskatchewan that could boast an initial capital intensity of US$30,500 per tonne of lithium hydroxide monohydrate (LHM).
The projected all-in operating costs at the Kindersley Lithium project (KLP) are US$3,899 per tonne of LHM, amounting to an annual expenditure of US$42.9 million. KLP’s total life is estimated at 20 years.
Phase one of the project in Saskatchewan includes an after-tax internal rate of return (IRR) of 48.5% and an after-tax net present value (NPV) of US$1 billion at an 8% discount rate. The initial capital investment for the project is estimated at US$335 million, with a payback period of 3.7 years.
The PEA is based on annual production of 11,000 tonnes of LHM, and assumes a sales price of US$25,000 per tonne.
Its economics are better than other North American brine-based lithium projects, and the project has the potential for future phases, the company said.
“The independent economic results of phase one of the KLP compare favourably within the lithium mining industry from a capex and opex perspective and we believe the results of the PEA bode well for critical future steps,” said company president and CEO Gregg Smith. “We now focus our corporate attention on the completion of a field pilot with Koch Technologies Solutions’ extraction process, while at the same time undertaking certain field activities to provide higher certainty on our resources leading to a pre-feasibility study.”
Twenty-four of Grounded’s 300 sections of lithium rights will be developed in the first phase at KLP, with a balance of the sections supporting the development of future phases of the project.
In a research note on Thursday, Red Cloud Securities mining analysts Alina Islam and David Talbot wrote that the economic metrics of the PEA are very positive, especially considering the current inflationary environment of the industry.
The analysts added that the 4.2-million tonnes of lithium carbonate equivalent in inferred resources at KLP support a mine life longer than 20 years as well as additional phases of production.
“With the PEA complete, investors should remain focused on the construction of the field pilot plant (2024), which we believe is the next major de-risking step for the project,” they wrote.
The analysts maintain their buy rating for Grounded Lithium and increase their target share price to $1.75 each, up from their previous target of 90¢, both far above the level on Thursday in Toronto of 15¢, itself down 9% from the closing price on Wednesday. The company has a market capitalization of $10.4 million and its shares traded in a 52-week window of 13¢ and 50¢.
