Develop MD Bill Beament
ASX-listed Develop has unveiled the results from an updated scoping study for its Pioneer Dome lithium project, in Western Australia, with two production scenarios now under consideration.
Both scenarios – the first based on building a comprehensive processing plant and the second a mine gate sale or toll treatment scenario – are set to generate strong financial results, the Bill Beament-led company said on Tuesday.
The primary scenario entails the construction of a processing plant, including a flotation circuit, accommodation camp, and associated infrastructure, at a cost of A$285-million.
Projections suggest significant free cash flow generation, with an estimated A$666-million based on consensus price forecasts of $1 393/t.
Develop would consider adopting this option should the price of 6% spodumene concentrate surge to $1 500/t, yielding A$823-million in free cash flow.
The success of this scenario can be attributed to Develop’s strategic decision to predominantly pursue underground mining methods at Pioneer Dome. By focusing on small, low-strip-ratio pits initially, the project aims to accelerate ore production and cash flow, facilitating a swift and efficient production ramp-up. These adjustments mark a significant improvement over mine plans contemplated in the February 2023 scoping study, leading to enhanced production profiles and reduced surface disturbance.
The second scenario revolves around a mine gate sale or toll treatment arrangement, requiring a capital outlay of just A$35-million to A$40-million. This approach is projected to save an estimated A$250-million by eliminating the need for constructing a processing plant, associated infrastructure, or an accommodation camp.
With reduced construction and operating risks, this scenario presents a compelling opportunity for increased net present value and cash flow, subject to favourable commercial terms.
“We have completely redesigned the project, removing the planned large pits and replacing it with smaller pits which will generate cashflow faster and for less capital cost,” Beament said.
“We will then go underground, which was not contemplated in the previous study. This will generate less waste and surface disturbance.”
He said Pioneer Dome was set to generate outstanding cashflow and financial returns in both of the production scenarios outlined.
The company will advance both options in parallel, while progressing approvals processes and other aspects of the project over the next six months.
“There is also very limited availability of Joint Ore Reserves Committee-classified spodumene resources in Australia which are not already covered by offtake contracts. Such resources qualify for substantial government subsidies, including from the US, further underpinning the financial merit of Pioneer Dome.
“As a result of this study, we now have a host of development and funding options to consider,” said Beament.