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On 19 November 2018, AVZ Minerals Limited (ASX:AVZ) provided an update of the Scoping Study on the Manono Lithium Project in the Democratic Republic of Congo (DRC) in which it was highlighted that the Transport cost estimates are now reduced by US$58/tonne to US$163/t which is a reduction of 26 percent in the transport cost estimate.
This scoping study was undertaken to determine the financial aspects of potential future operations at the Manono Lithium Project. As per the results from the initial Scoping Study which was announced on 9 October 2018, the transport cost of the preferred route represents the largest operating cost amounting to some US$221/t of concentrate representing about 62% of all operating costs. However, it was recently revealed by AVZ minerals that its technical team has reviewed various methods of transshipment of concentrate and it has identified significant savings that could reduce the overall transport cost.
As part of companyâs continual optimization strategy, the proposed method of packaging and moving the concentrate was reviewed, and the company was able to simplify the available transport methods to port with positive economic results, reducing the transport cost and some associated costs by approximately US$58/t from the original estimate of US$221/t. Now the total transport costs for the AVZ Manono Project is estimated at USD163/t. The company is anticipating potential further transport related cost savings through negotiating volume discounts with transport providers.
The economic value of the Manono Lithium Project based on the 2Mtpa scenario has been re-run following the adoption of new transport costs due to which the case 1 (2 Mtpa) pre-tax pre-royalties NPV has increased by approximately US$190 Million to US$1.79 Billion with an estimated IRR greater than 90% based on ±35% accuracy and including US$36M in capital contingency. Further, the F.O.B. Operating costs to Dar-es-Salaam reduced by US$58/t to US$297/t from original estimates of approximately US$355/t of concentrate for 2Mtpa which is a 16 percent reduction in the total cash cost estimate. In the scoping study update, it has been indicated that funding in the order of approximately $150M to $160M (C5 ±35% and includes US$36m contingency) will likely be required for Case 1 (2Mtpa).
As per the AVZ Minerals Managing Director Mr. Nigel Ferguson, the companyâs Board is extremely pleased with the results of the updated scoping studies which has demonstrated a significant reduction in costs associated with transporting the product to port. He further added that the management of the company is confident that project economics can also be improved, especially in the areas of transport, processing, power costs by utilizing a refurbished hydro plant at Piana Mwanga and the recovery of tin as a by-product which can add considerable value to the bottom line and has not been included in any financial modelling to date.
AVZâs shares traded at $0.081 with a market capitalization of $152.97 million as on 19 November 2018 (AEST 1:40 PM).
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