Lithium Universe's Bécancour Refinery PFS Shows Promising Future
LITHIUM UNIVERSE LIMITED (LU7) Share Update September 2024 Sunday 29th
Lithium Universe Announces Strong Preliminary Feasibility for Bécancour Lithium Refinery
Lithium Universe Limited (ASX: LU7) has announced the results of its Preliminary Feasibility Study (PFS) for the Bécancour Lithium Carbonate Refinery in Québec, Canada, showcasing a strong economic viability even in a low pricing environment.
Instant Summary:
- Positive Bécancour Refinery PFS with a pre-tax NPV of approximately US$779 million.
- Pre-tax IRR of around 23.5% and payback period of 3.5 years.
- Annual capacity of up to 18,270 tonnes of battery-grade lithium carbonate.
- Operating costs estimated at around US$3,976 per tonne.
- Expected annual revenue of approximately US$383 million and EBITDA of around US$147 million.
Project Overview
The Bécancour Lithium Refinery project aims to establish a reliable, low-risk lithium conversion refinery with an annual capacity of up to 18,270 tonnes, utilizing proven expertise from the Jiangsu processing model. The facility will produce environmentally friendly, battery-grade lithium carbonate.
The project’s economics are highly favorable, even with conservative price assumptions. The refinery is economically viable with a pre-tax Net Present Value (NPV) of approximately US$779 million, using an 8% discount rate, and a pre-tax Internal Rate of Return (IRR) of around 23.5%. The payback period is estimated at 3.5 years.
Financial Modelling
The financial model is built on cautious price forecasts of US$1,170 per tonne for spodumene concentrate (SC6) and US$20,970 per tonne for battery-grade lithium carbonate equivalent (LCE). Key operational assumptions include 86% plant availability and 88% lithium recovery. At full production capacity, the project is expected to generate approximately US$383 million in annual revenue, with costs totaling around US$236 million, leading to an annual EBITDA of approximately US$147 million and a gross margin of around 38%.
Design and Technology
The refinery will use proven Jiangsu Refinery operating technology and lithium industry experience to produce up to 18,270 tonnes/year of green battery-grade lithium carbonate. The plant will focus on lithium carbonate production, which is essential for LFP batteries. The design is based on real operating data and experience, ensuring a reliable and efficient operation.
Location and Benefits
Québec is an ideal trans-Atlantic lithium conversion center, comparable to China, with feedstock sourced from Canada, Brazil, and Africa, and the end market being North America. The location offers critical cost benefits, including cheap green power from Hydro Québec, transport savings, and US/Canada tariffs, leading to a 95% reduction in GHG emissions.
Next Steps
LU7 continues to progress with full Definitive Feasibility Study and offtake discussions with interested OEMs. The company aims to secure strategic partners to help fund the project and establish Québec as a key lithium conversion hub for the Transatlantic region.
The announcement of a strong PFS for the Bécancour Lithium Refinery is likely to positively impact Lithium Universe's stock, as it demonstrates the project's economic viability and strategic importance. The expected high returns and robust financial metrics will likely attract investor interest and confidence.
Investor Reaction:
Analysts are likely to react positively to the news, given the strong financial metrics and strategic location of the refinery. The project's focus on green energy and its potential to reduce dependence on Chinese lithium converters will be seen as significant advantages.
Conclusion:
Investors should keep an eye on the progress of the Definitive Feasibility Study and offtake partnerships. The successful completion of these steps will be crucial for the project's advancement and could lead to significant returns for investors. Subscribe to our newsletter for regular updates on Lithium Universe and other stock market news.