Lithium explorer Kidman Resources Limited (ASX: KDR) made an announcement on 18 December 2018 stating that the Covalent Lithium has completed an integrated pre-feasibility study (IPFS) for the Mt Holland Lithium Project. The IPFS has confirmed the compelling outcomes from the previous studies which were conducted on the Kwinana Lithium Refinery and the Mt Holland lithium Mine & Concentrator which includes a highly attractive NPV (Net Present Value) and IRR (Internal rate of return). Despite this news, the share price of the company decreased by 9.091 percent as on 18 December 2018.
As per the IPFS, the Mt Holland Lithium Project is having a long-life, low-cost operation with the projected annual average production of 45,254 tonnes of LiOH (Kidman share: 22,627 tonnes). According to IPFS, the total integrated capital expenditure of Mt Holland Lithium Project is US$737 million (Kidman share: US$368 million) which is broadly in line with the Refinery PFS and updated scoping study on the Mine & Concentrator.
As part of the IPFS, the company has also announced its maiden Ore Reserve for the Earl Grey deposit at Mt Holland of 94.2 million tonnes at 1.5 percent Li2O. As per IPFS, the operating cost of the project has increased slightly from the Refinery pre-feasibility study and updated scoping study on the Mine & Concentrator, from US$4,808/t to US$5,085/t. The integrated pre-feasibility study has confirmed outstanding project economics which includes the post-tax NPV10% (nominal) of US$2.2 billion, robust margins, rapid payback (3 years) and a strong IRR of 26.6%.
The integrated pre-feasibility study has concluded a C1 cash operating cost (net of by-products) of US$4,507/t LiOH (excluding government royalties), which will be subject to further optimization during the Definitive Feasibility Study stage. In IPFS, the Mine & Concentrator capital expenditure of the project has increased by approximately US$33 million to US$299 million as compared to Refinery PFS and Updated Scoping Study (Oct-18). The increase in capital expenditure relating to the concentrator is mainly driven by non-process infrastructure including power connection and temporary power requirements, air strip and aerodrome needs and an increase to the cost of the water plant facility.
In IPFS, the Refinery capital expenditure of the project decreased approximately by US$25 million to US$310 million mainly due to US$18 million re-allocation of the management component of the cost of engineering, procurement, and construction to owners costs. The next step in the development of the Mt Holland Lithium Project is a Definitive Feasibility Study (DFS) which is expected to be completed in 1H 2019, after which the company will make the final investment decision.
On 18 December 2018, the company also announced that its joint venture partner in the Mt Holland Lithium Project, Sociedad Quimica y Minera de Chile S.A. (SQM), has now completed its milestone payments in respect of its earn in to the project. SQM has paid US$25 million directly to Kidman and has made a payment of US$60 million directly to the Covalent Lithium joint venture (Kidman share 50%).
KDR’s shares traded at $1.250 with a market capitalization of circa $549.4 million as on 18 December 2018 (AEST 4:00 PM).