This article is a sponsored feature from Mining.com.au partner Patagonia Lithium. It is not financial advice. Talk to a registered financial expert before making investment decisions.
From the start, Patagonia Lithium (ASX:PL3) has chosen pathways designed to lead to a green, low-cost lithium development and strengthen its position in the lithium carbonate supply market as prices start to stabilise.
Having just a couple of months ago announced a four-fold increase in the inferred and indicated mineral resource estimate at its Formentera Lithium Brine Project in Jama, Argentina, the company is now advancing towards further drilling and completion of a Scoping Study.
In mid-July, Patagonia Lithium boosted the resource estimate by 319% to 103,000 tonnes of contained lithium metal equivalent, which translates to about 551,400 tonnes of lithium carbonate equivalent.
Lithium carbonate is a key raw material and precursor used in the manufacture of lithium-ion batteries.
Executive Chairman Phillip Thomas tells Mining.com.au the increased resource is a significant step in Patagonia Lithium’s development strategy.
“This is an enormous number when you think about it,” he says.
“What it is saying is that in the basin there is 103,500 tonnes of lithium ions floating around in the brines. There is about 345,000 megalitres of brines in the basin that we have measured using the aquifer domains in the block model.
“This means the project is very commercial, the average lithium grade is good, and the volume is categorised as drainable, so this isn’t just a block model that ignores the specific yield.”
To achieve the substantial increase in resource, Patagonia Lithium measured the borehole porosity using magnetic resonance, a well known geophysics method.
This provided the company with a more accurate specific yield every centimetre rather than six core samples that were taken at 25m intervals and analysed.
High porosity drives strong pumping results, higher confidence
The higher the porosity, the more extractable the lithium.
“In simple terms, we worked out how much brine we could pump that is held in the aquifer sediments,” Thomas explains.
“The core samples showed porosity as high as 40% and the borehole magnetic resonance (BMR) average was 11.76%, so we can be very optimistic that we will be able to pump out sufficient brine to meet our production targets.”
The specific yield, which is a key factor for lithium brine extraction, increased nearly 250% and the average lithium grade increased to 296 parts per million (ppm) is among the highest values in the region.
As a result of the high porosity, all four wells at the Formentera project performed strongly, with Jam 24-04 the standout at 3,500 litres an hour out of a 4-inch pipe and small pump for more than 72 hours.
Thomas says the pumping test on the second well did not impact the brine level in first well, which was only 300m away, so it’s easy to conclude the flow from aquifers is significant.
“This was because we have high porosity, and the brines come in from all directions not in channels,” he says.
At the targeted 10,000 tonnes a year of lithium carbonate, Patagonia Lithium would have to pump 6,300 megalitres each year, which equates to 18 megalitres per day.
Assuming 300ppm lithium extraction from four wells, the company needs to pump 4.25 megalitres per day from each well to deliver 10,000 tonnes per year of lithium carbonate.
“Given we have billions of litres of brine and pumps can deliver 500,000 litres an hour, it’s not a big ask,” Thomas notes.
“Most of the brine is drawn from the zone 200-400m. It’s nine hours of pumping.”
Proven technology minimises project development risks
Patagonia Lithium reviewed 24 of the 65 direct lithium extraction (DLE) technologies that are at various stages of development.
Thomas tells this news service the company did not want to risk using a new technology and decided instead to go with an already proven technology – solvent extraction.
“Solvent extraction has been around for 100 years, so we didn’t want to take the risk of a new technology,” he says.
“BHP has proven the process at Olympic Dam with uranium extraction from the waste copper ore, with 12 S-X columns processing more than 30 megalitres per day and they are producing 3,700 tonnes a year of high grade U3O8 at a very low opex.”
The technology Patagonia Lithium is using was developed by Ekosolve™ and utilises a lot less water, captures and recycles 99.7% of the solvents, operates continuously and produces more quickly than other technologies, achieves higher recoveries and generates battery grade lithium carbonate more cost effectively.
Using direct lithium extraction eliminates the need for evaporation ponds and allows for the waste brine to be returned to where it came from. The Formentera project has a large lagoon where waste brine can be returned and evaporated or reinjected.
Thomas says the Ekosolve™ process is the greenest and environmentally sound of the processes Patagonia Lithium considered. Even the salt water is used in the washing stage.
During pilot plant tests at University of Melbourne, the Ekosolve™ DLE technology was able to extract 92.1% of the available lithium from the brine and produce 99.8% lithium carbonate using a crystalliser.
“Our projections are to build a 10,000-tonne lithium carbonate plant at a sub-$120 million capex and sub $2,500 opex, then we will be the lowest cost producer. The Definitive Feasibility Study (DFS) will tell us where we will land on capex and opex” Thomas explains.
“Our projections are to build a 10,000-tonne lithium carbonate plant at a sub-$120 million capex and sub $2,500 opex, then we will be the lowest cost producer”
By comparison, Minera Exar SA – a joint venture between Lithium Americas (NYSE:LAC) and Ganfeng Lithium (SSE:002460) – has an opex of about $5,500 per tonne, and Rio Tinto’s (ASX:RIO) opex is probably going to be at around the same level.
Rio Tinto also has a large capex budget, outlining a spend of $2.5 billion to produce 59,000 tonnes per year of lithium carbonate from the Rincon project in Argentina.
Interestingly, Thomas is the former CEO and director of exploration of Admiralty Resources (ASX:ADY) – a previous owner of the Rincon project – which between 2004 and 2008 explored and developed a pilot plant at the project.
“if you don’t use SX DLE, capex can be very expensive – at least $125 million for ponds, and most other DLE’s are north of $40,000 per one tonne of production” he notes.
Low opex strengthens competitive market position
With Ekosolve’s™ DLE technology expected opex to cost Patagonia Lithium less than US$4,000 ($6,046) a tonne, Thomas says the Formentera project would be economical at US$10,000 a tonne for lithium carbonate. The US is a target destination for sales where the price is higher than China.
Lithium carbonate battery grade 99.5% is currently selling for over US$9,100 per tonne.
Thomas says Patagonia Lithium would give the green light for development at the current price if the DFS was completed. At the present time, a 1,000-tonne demonstration plant is the focus. Plans are that this will be expanded to a 10,000-tonne plant.
Once the Formentera plant is operating, it is estimated that it could generate around $100 million in revenue at US$10,000 a tonne of lithium carbonate produced.
At an opex of $2,500 that would deliver earnings before interest, taxes, depreciation and amortisation of about $75 million, less amortisation costs of the capital expended.
This would allow Patagonia Lithium to pay off the project in around 16 months.
The company’s focus is now on increasing the confidence in the resource to pave the way for the completion of a Scoping Study.
Patagonia Lithium has permits in hand to drill 10 wells at Formentera and eight wells at Cilon.
However, Thomas believes the company will only need to drill an additional two wells and undertake passive seismic and BMR downhole surveys to shift enough material into the higher confidence measured and indicated categories.
A general rule of thumb being a minimum of 70-80% in the indicated and measured categories.
While there is no strict ASX-defined percentage, projects are often deemed viable when these higher confidence categories comprise a significant portion, especially for initial years of production, to ensure a reasonable degree of confidence in the project’s viability.
“Once we exceed 50-70% of the calculated mineral resource estimate as indicated and measured we can complete the Scoping Study which has had a lot of work done so far, including a complete mass balance model and simulation for the 1,000-tonne plant by Ekosolve,” Thomas says.
“Then we can progress to a proven and probable reserve estimate and DFS.
“Ekosolve Inc and Geoframe-Energy LLC is building a 3,000-tonne-per-annum lithium carbonate plant in East Texas USA in the Smackover formation, and Ekosolve have offered assistance to provide the engineering data from that project which will save time and cost.”
Write to Angela East at Mining.com.au
Images: Mining.com.au & Patagonia Lithium
