On 22 October 2018, Kidman Resources Limited (ASX: KDR) announced the results of a pre-feasibility study completed on the proposed Kwinana Lithium Refinery and an updated scoping study on the proposed Mt Holland lithium mine and concentrator. After the release of this news, the share price of the company increased by 14.13 percent as on 22 October 2018.
As per the study, the integrated project which is comprised of the Mine & Concentrator and Refinery being developed by Kidman (50%) and joint venture partner Sociedad Quimica y Minera de Chile S.A. (SQM) (50%), has a compelling business case with attractive economics.
The Mt Holland Lithium Project will produce a spodumene concentrate from the Mine & Concentrator. The concentrate will be transported to the Refinery and it will be processed to produce an average of around 45,254 tonnes per annum of battery-grade lithium hydroxide. The project will make Covalent Lithium a leading provider of refined battery-grade LiOH, mainly for supply to electric vehicle manufacturers. The results have confirmed that the Covalent Lithium will be a low cost, an integrated producer of battery-grade lithium hydroxide for the high growth electric vehicle market.
As per the Scoping study and the project feasibility study, it is projected that Mt Holland Lithium Project will have an annual average production of approximately 45,254 tonnes of LiOH (Kidman share: 22,627 tonnes) and the total integrated capital cost will be around US$601 million out of which the Kidman share will be around US$300 million. The projected Globally competitive C1 cash operating cost is US$4,487 per tonne of LiOH. The estimated project life is 47 years with projected revenue of US$33.5 billion in which Kidman share holds US$16.8 billion. Further, it has projected EBITDA of US$22.0 billion out of which Kidman share is US$11.0 billion. Moreover, multiple opportunities have been identified in the pre-feasibility study, which could reduce the capital cost estimates which could end up improving the overall project value. The project is expected to create around 700 full-time equivalent jobs during construction and around 300 full-time equivalent jobs during operations. The company is in discussions to further offtake agreements with high-quality counterparties to secure further binding contracts for approximately 75 percent of Kidman’s share of production in the initial years of the project.
In FY 2018, the revenue from continuing operations of the company decreased from $92,636 in FY 2017 to $67,843 in FY 2018. The net loss of the company decreased from $31.31 million in FY 2017 to $9.68 million in FY 2018. The net cash outflow from operating activities decreased from $8.94 million in FY 2017 to $5.62 million in FY 2018. As at 30, June 2018, the company had cash and cash equivalent of $10.02 Mn.
In the last six months, the share price of the company decreased by 51.06 percent from $1.880 to $0.920 as on 19 October 2018. KDR’s share traded at $1.050 with a market capitalization of $366.68 million as on 22 October 2018 (AEST 1:59 PM).
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