Aim-listed explorer Savannah Resources has reported strong economic indicators for its Mina do Barroso lithium project, in northern Portugal, sending the company’s stock up 14% on Thursday.
The study is considered a base case for the project and calculated a pre-tax net present value, applying an 8% discount rate, of $356-million and an internal rate of return of 63%.
Based on a mining inventory of 14.42-million tonnes at 1.07% lithium oxide (Li2O) and average run-of-mine production of 1.3-million tonnes a year, the study outlines an 11-year operation, producing 175 000 t/y of spodumene concentrate at 6% Li2O.
Initial capital expenditure of $109-million is forecast, with the figure including the feldspar and quartz circuit, but excluding contingencies.
Minas do Barroso is expected to generate earnings before interest, taxes, depreciation and amortisation (Ebitda) of $805-million over its life-of-mine, resulting in a payback period of 1.7 years. On average, the mine should deliver Ebitda of $72-million a year.
Commenting on the scoping study, CEO David Archer said that the results of the study put Savannah on track to become a low-cost producer of spodumene lithium concentrate by early 2020.
“There is exponential growth across the lithium supply chain as the industry gears up for transformational change to meet demand from the automotive and energy storage sectors, with Bloomberg New Energy Finance recently reporting that the transport sector is fast becoming the main driver of demand for lithium-ion batteries, overtaking consumer electronics for the first time this year. This is a great time to be bringing a new lithium mine into development,” Archer stated.
Savannah is proposing to start the nine- to ten-month construction of Minas do Barroso in the second quarter of next year, which will allow for production to start in the first quarter of 2020.
Archer said that the company was committed to maintain the fast pace at Mina do Barroso, which it acquired just over a year ago, and said that it would seek to fast-track the development to production.
“We believe significant further upside exists, with excellent potential to increase the mineral resource estimate and the mining rate, schedule lower strip ratio ores in the latter years of the project and optimise site operational features to further lower the cost of production and increase the value of the project.”
Shares in Savannah traded 14% higher at 15.08p at 11:45 UK time.