Prospect Resources (ASX:PSC) DFS and funding update


by Rachael Jones

Prospect Resources Limited (ASX:PSC) Managing Director, Sam Hosack, provides an update on the company's Arcadia lithium project in Zimbabwe, including advanced negotiations with a number of African and international banks on funding.

Rachael Jones: Hello. I'm Rachael Jones for the Finance News Network. Joining me today from Prospect Resources (ASX:PSC) is Managing Director, Sam Hosack. Sam, welcome back to FNN.

Sam Hosack: Thank you, Rachael.

Rachael Jones: Now, Prospect Resources is developing a globally unique tier one lithium project in Africa. How does this project compare to other hard rock lithium projects?

Sam Hosack: Prospect Resources with its 87%-owned Arcadia project is really punching quite high there. We're the seventh largest hard rock lithium deposit, and we certainly stand out as one of the most advanced in Africa, if not the most advanced.

The project is characterised with great geology, very low strip ratios, high grade, and that leads to a very competitive cost of production. So, our spodumene C1 cost is very competitive, the lowest quartile. You know, the development costs, the capital intensity -- again in the bottom quartile. So, a very competitive project. The technicals have been really well understood by my management team, and we're pushing really hard to ensure this project stands out.

Rachael Jones: And now let's talk about progress. What has been achieved over this quarter?

Sam Hosack: We've had a tremendously productive year. We've been very focused on the Arcadia project and in particular on funding, but some of the other highlights that we've been able to achieve -- in particular on the glass and ceramics market, which has been our strategic focus. We've passed the prequalification process and some of the qualification gates with those customers, and that's very promising. It validates the premiums and the demand for this particular low-iron petalite, so that's been tremendously rewarding for us.

We've been able to upgrade the ore reserve, which has led to a 39% increase in lithium under the reserve. That's had a direct corresponding upgrade to the net present value, so that's been a huge win for the team.

Lastly, we've taken all of that knowledge and we've put it into an upgraded definitive feasibility study. Just to take you through some of the definitive feasibility highlights, the NPV10 has increased to $710 million and the EBITDA before tax, the average in the first five years has increased to 168 million US dollars. That's almost a 100 per cent increase on our previous assumptions. So, that's a real boost to the viability of this project.

And fundamental to us, we've been able to maintain the capital intensity and the capex and drive down the opex costs, particularly for the battery products, the spodumene, the 6 per cent spodumene.

Rachael Jones: That sounds like great news. And what do you have planned for the next quarter?

Sam Hosack: Certainly to conclude on the year we would like to see the completion of the due diligence on the MOU. We've recently signed an understanding with a Russian entity -- Uranium One Group. And what we know about this group is they're strategically focused on lithium. We understand Russia has no substantial reserves of their own. We also understand they're very in favour with our location and our asset class and quality.

So, it certainly has great prospects, and we would expect in the first quarter to complete that due diligence process, and that's a priority for us.

In addition to that, we're progressing with our finance and we are in the process and would like to conclude on the identification of an appropriate finance partner to project-finance the Arcadia project.

Rachael Jones: And Sam, finally now, is there anything else you'd like to add?

Sam Hosack: Thank you. We have a clear pathway forward through our debt and equity partners, and we look forward to bringing you updates on that process. Thank you very much.

Rachael Jones: Sam Hosack, thanks for the update.

Sam Hosack: You're welcome.


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