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Grounded Lithium Announces Robust Investment Metrics in Preliminary Economic Assessment for the Kindersley Lithium Project

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Grounded Lithium Announces Robust Investment Metrics in Preliminary Economic Assessment for the Kindersley Lithium Project

 

 

 

 

 

Grounded Lithium Corp. (TSX-V: GRD) (OTCQB: GRDAF) is pleased to announce the results of our preliminary economic assessment on the first phase 11,000 tonnes per year of battery-grade lithium hydroxide monohydrate production from the Kindersley Lithium Project. We anticipate development of additional phases at the KLP motivated largely by the compelling commercial merits of the economics of the PEA.

 

Phase 1 KLP Highlights: 

  • Generates an after-tax internal rate of return of 48.5% using a realized sales price of USD $25,000/tonne of LHM (flat for the duration of the model) and an after-tax USD $1.0 billion net present value at an 8% discount rate, on a capital investment of USD $335 million;
  • Payout of initial capital costs is only 3.7 years inclusive of lead time design and construction of 1.5 years. We anticipate future KLP phases will be materially financed via internally generated cash flow;
  • Initial capital estimate of USD $335 million (including USD $45 million for contingencies) delivers a capital intensity of USD $30,500/tonne of LHM for our initial 11,000 tonnes per year project, one of the lower capital intensities of North American lithium from brine projects;
  • All-in operating costs are anticipated to be USD $3,899 per tonne of LHM, or USD $42.9 million annually;
  • Only 24 of our current 300 sections of lithium rights will be developed in Phase 1 of the KLP. The balance of the sections will support the development of subsequent phases of the KLP; and
  • Phase 1 infrastructure investment is expected to underpin capital and operating cost efficiencies for all future phases.

 

“Grounded is pleased to have achieved another significant milestone in less than three years from incorporation,” commented Gregg Smith, President and CEO. “The independent economic results of Phase 1 of the KLP compare favourably within the lithium mining industry from a CAPEX and OPEX perspective and we believe the results of the PEA bode well for critical future steps, including securing strategic partnerships, off-take agreements, and capital formulation for a commercial project. We now focus our corporate attention on the completion of a field pilot with Koch Technologies Solutions’ extraction process, while at the same time undertaking certain field activities to provide higher certainty on our resources leading to a pre-feasibility study.”

 

Project Summary

 

The economic analysis of the PEA is based on the following main assumptions:

  • realized sales price of USD $25,000 per tonne of LHM;
  • annual production of 11,000 tonnes per year of LHM;
  • commerciality of KTS’ Li-Pro lithium extraction technology;
  • minimal prefiltering expenditures due to the absence of hydrocarbons and H2S;
  • large diameter wellbores to mitigate pressure loss due to friction and permit installation of large volume electrical submersible pumps; and
  • estimated operating and capital costs for the project based on the most current industry data available inclusive of recent strong inflationary pressures on facilities and labour.

 

The PEA is based on the expected first phase of production at the KLP which is derived from the mineral resource estimate for the KLP set out in Company’s NI 43-101 technical report titled, “NI 43-101 Technical Report: Resource Assessment of the Kindersley Lithium Project in Saskatchewan, Canada for Grounded Lithium Corp. (As of March 15, 2023)” which is available on SEDAR at www.sedarplus.com.

 

All values reported are in USD unless otherwise noted. The Company will file the PEA on SEDAR (www.sedarplus.com) within 45 days of this press release. The PEA presents data provided by several leading experts in their respective fields, namely Sproule Associates Limited, Grey Owl Engineering, Codeco – Vanoco Engineering Inc., Tundra Engineering Inc. and Fracture Modeling Inc.

 

Table 1 – Summary Economics

 

Description Value Units Value Units
  Average Annual Production (LHM) 11,000 tonnes/year 12,125 tons/year
  Average Annual Production (LCE) 9,685 tonnes/year 10,676 tons/year
  Project Life 20 years 20 years
  Foreign Exchange (FX) 0.75 ratio 1.33 ratio
  Total Capital Cost (CAPEX) 447,323 CAD$M 335,492 USD$M
  Annual Operating Expenditure (OPEX) 57,188 CAD$M 42,891 USD$M
  OPEX per tonne LHM 5,199 CAD/tonne 3,899 USD/tonne
  LHM Commodity Price 33,333 CAD/tonne 25,000 USD/tonne
  Average Annual Revenue 366,592 CAD$M 274,944 USD$M
Economic Indicators Before-Tax
(Btax)
Units After-Tax
(Atax)
Units
  Net Present Value (NPV@8%) 1,819,507 CAD$M 1,309,860 CAD$M
  Net Present Value (NPV@8%) 1,364,630 USD$M 982,395 USD$M
  Internal Rate of Return (IRR) 58.2 % 48.5 %
  Payout (PO) 3.5 years 3.7 years
  Profitability Index (PI@8%) 5.1 ratio 3.9 ratio

 

Note 1: The PEA is a preliminary cost estimate and includes inferred mineral resources that are considered too geologically speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves under National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101“). There is no certainty the results of the KLP outlined by the PEA will be realized.

 

Capital Costs

 

Table 2 – KLP Capital Cost Summary

 

   ($ thousands)  Total
CAD
Total
USD
  Wellfield
            Drilling $        31,051 $        23,289
            Completion 17,280 12,960
            Pipelines 55,782 41,836
  Subtotal $      104,113 $        78,085
  Central Processing Facility
            Infrastructure $      238,754 $      179,066
            Planning, Engineering, Legal & Administration 14,922 11,192
            Construction & Commissioning 29,844 22,383
  Subtotal $      283,520 $      212,640
            Contingency $        59,689 $        44,766
  TOTAL $      447,322 $      335,492

 

Given the operating conditions, the capital intensity for the KLP is forecasted to be materially lower than some of the other operations in the industry. Capital efficiency is vitally important in projects of this size and the leverage that accrues to project stakeholders due to industry leading capital efficiency ratios directly impact rates of return. These capital estimates will be further refined as the Company moves toward the pre-feasibility and bankable feasibility milestones. These estimates represent a Class 5 engineering cost estimate. We do expect modifications to these estimates with the completion of more precise and detailed engineering.

 

Operating Costs

 

Table 3 – KLP Operating Cost Summary

 

Annual OPEX in $ thousands per year
OPEX in $ per metric tonne LHM
Annual OPEX
CAD/yr
Annual OPEX
USD/yr
OPEX
CAD/tonne
LHM
OPEX
USD/tonne
LHM
     Personnel $           6,250 $           4,688 $              568 $              426
     Electric Power 13,626 10,220 1,239 929
     Reagents and Consumables 21,218 15,914 1,929 1,447
     Maintenance and Servicing 7,839 5,879 713 534
     Product Transport & Disposal 2,555 1,916 232 174
  Direct Operational Expenditures $         51,489 $         38,617 $4,681 $3,511
  Indirect Operational Expenditures $           2,528 $           1,896 $230 $172
  Land Fess, Taxes, Other $           3,172 $           2,379 $288 $216
  TOTAL $         57,188 $         42,891 $5,199 $3,899

 

Total operating costs of USD $42.9 million per year, or USD $3,899 per tonne of LHM, are broken out by each major project step and are inclusive of direct and indirect costs. The majority of the operating costs are associated with reagents required within the system and power consumption. For purposes of the PEA, we assumed that sufficient power can be secured from the existing grid structure. However, as we advance the KLP towards commercialization, there is the potential to construct owner secured power options such as a cogeneration unit. This would represent an additional capital charge offset by the benefit of stable, predictable, cost-efficient power supply. Excess power generated from such a unit could be sold into the existing power market to partially offset the operating costs.

 

Sensitivity Analysis

 

Table 4 – Economic Sensitivity Summary (USD)

 

OFAT Sensitivity Analysis – CAPEX
  ($ thousands) Low Case
CAPEX -40%
USD
Low Case
CAPEX -20%
USD
Base Case
CAPEX
USD
High Case
CAPEX +20%
USD
High Case
CAPEX +40%
USD
  CAPEX $           201,295 $           268,394 $           335,492 $           402,590 $           469,689
  NPV@8% – Btax $        1,473,192 $        1,418,999 $        1,364,630 $        1,310,615 $        1,256,423
  NPV@8% – Atax $        1,067,559 $        1,025,042 $           982,395 $           940,007 $           897,328
  IRR (%) – Btax 92 71 58 49 42
  IRR (%) – Atax 76 59 49 41 36
OFAT Sensitivity Analysis – OPEX
  ($ thousands) Low Case
OPEX -40%
USD
Low Case
OPEX -20%
USD
Base Case
OPEX
USD
High Case
OPEX +20%
USD
High Case
OPEX +40%
USD
  OPEX $             25,735 $             34,313 $             42,891 $             51,469 $             60,047
  NPV@8% – Btax $        1,498,577 $        1,431,692 $        1,364,630 $        1,297,922 $        1,231,037
  NPV@8% – Atax $        1,080,176 $        1,031,350 $           982,395 $           933,698 $           884,872
  IRR (%) – Btax 62 60 58 56 54
  IRR (%) – Atax 52 50 49 47 45
OFAT Sensitivity Analysis – LHM Price
  ($ thousands) Low Case
LHM Price -40%
USD
Low Case
LHM Price -20%
USD
Base Case
LHM Price
USD
High Case
LHM Price +20%
USD
High Case
LHM Price +40%
USD
  LHM Price per tonne $                    15 $                    20 $                    25 $                    30 $                    35
  NPV@8% – Btax $           576,730 $           970,769 $        1,364,630 $        1,758,846 $        2,152,885
  NPV@8% – Atax $           406,465 $           694,876 $           982,395 $        1,270,172 $        1,557,821
  IRR (%) – Btax 31 45 58 71 83
  IRR (%) – Atax 27 38 49 59 68

 

A table similar to Table 4 expressed in Canadian dollars can be found on the Company’s website. A detailed future pricing study for lithium chemicals was not completed for the PEA. The average price used for future sales of battery-quality LHM was developed by reviewing pricing data generated from reliable sources as reported in publicly disclosed data collected from peer companies.

The future average selling price of USD $25,000/tonne for LHM is consistent with that used in publicly released economic assessments of other lithium projects in recent history. Current spot pricing for battery-grade lithium products average greater than USD $40,000/tonne, therefore the potential upside leverage to KLP economics is noteworthy.

 

Sensitivities demonstrate that the KLP is expected to provide torque to the upside upon any potential future increase in underlying commodity prices. With the demand for critical minerals expected to exceed world supply, the low-cost structure of the KLP is expected to provide elastic returns to the upside. The low-cost structure of the KLP was a key determinant in the Company focusing on the KLP area, since during downturns in commodity cycles, low-cost operations provide projects with improved price resilience.

 

About Grounded Lithium Corp.

 

GLC is a publicly traded lithium brine exploration and development company that controls approximately 4.2 million metric tons of lithium carbonate equivalent of inferred resource over our focused land holdings in Southwest Saskatchewan as of the effective date of the Technical Report. The Company’s PEA reports a Phase 1 NPV8 after-tax of US$1.0 billion with an after-tax internal rate of return of 48.5%. GLC’s multi-faceted business model involves the consolidation, delineation, exploitation and ultimately development of our opportunity base to fulfill our vision to build a best-in-class, environmentally responsible, Canadian lithium producer supporting the global energy transition shift. U.S. investors can find current financial disclosure and Real-Time Level 2 quotes for the Company on https://www.otcmarkets.com/.

 

Qualified Persons and Technical Report

 

Scientific and technical information contained in this press release has been prepared under the supervision of Doug Ashton, P.Eng., Suryanarayana Karri, P. Geoph., Alexey Romanov, P. Geo. and Meghan Klein, P. Eng., Dean Quirk, P.Eng., Jeffrey Weiss, P.Eng., Chad Hitchings., P.L. Eng., and Michael Munteanu, P.Eng., each of whom is a qualified person within the meaning of NI 43-101.

 

Certain data verification, exploration information and other disclosure regarding the mineral resources data contained in this press release is included in the Technical Report.

 

Market Support Agreement

 

The Company has transitioned its market making services to Red Cloud Securities Inc. Red Cloud will provide these services for trading on the TSX Venture Exchange in accordance with the TSXV policies, for the purpose of maintaining an orderly market. The Company will engage Red Cloud on a month-to-month basis for a fee of $5,000 cash per month. Red Cloud and GLC are unrelated and unaffiliated entities. Red Cloud will not receive shares or options as consideration. Red Cloud or affiliate(s) of Red Cloud currently hold 145,834 common shares and 2,326,137 broker warrants of GLC received in consideration for services previously performed for GLC. The capital used for market making will be provided by Red Cloud.

 

Posted July 26, 2023

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