Lepidico (ASX:LPD) Presentation, FNN Online Investor Event, December 2020

Company Presentations

Lepidico Limited (ASX:LPD) Managing Director Joe Walsh provides an update on the company, discussing the Karibib Project in Namibia and the Phase 1 Chemical Plant in Abu Dhabi.

Thank you very much, Clive, and thank you very much, everyone for attending this forum.

If I could have the next slide please, Clive?

We're listed on the ASX. We are looking at developing a vertically-integrated business in the lithium chemical space. So that's from mine through concentration to find lithium chemical production. We completed earlier on this year a definitive feasibility study for what we call our phase one project. This involves the development or the redevelopment, I should say, of two existing mines in Namibia. They've been depleted for tantalite and petalite, but all of the mineral that we're after, lepidolite, has really been left behind. So it's a brownfield development situation and we own 80% of the assets there.

We'll be looking at building a small concentrator to produce a lepidolite concentrate that will then be exported to our chemical plant, which we're planning on building in Abu Dhabi. One of the real differentiating factors of Lepidico versus other lithium development companies is the fact that we've got proprietary process technologies that allow us to treat lithium mica and lithium phosphate minerals, to produce lithium hydroxide and a series of byproducts as well.

The feasibility study shows very attractive economics and a 14-year project life. If you include the other strategic metal compounds that we can produce, caesium and rubidium, then overall production on a lithium-carbonate-equivalent basis is over 7,000 tons a year. 5,000 tons of that is in lithium hydroxide itself. The company has a market cap of about $40 million. And at the end of September, we had $4 million in cash, which sees us through into the middle of next year.

Next slide please, Clive.

This slide gives you a sense for our geographic split. We're listed in Australia. Our head office is in Perth. We've also got a technical capability in Perth through Strategic Metallurgy who's pioneered these technologies, but the technologies sit within the Lepidico entity. The upstream assets are in central Namibia. It's the Karibib Project, we've got over a thousand square kilometres there of prospective ground and 68 square kilometres under mining license. You can see there where we're looking at building the chemical plant in Abu Dhabi, and I'll cover off in a minute the reasons for locating it there, and then we've also got a corporate office here in Toronto where I'm residing.

Next slide, please.

This map shows the project area in Namibia. It's located about halfway in between the capital, Windhoek, and Swakopmund on the coast. And just south of Swakopmund is the Port of Walvis Bay. It's 220 kilometres from the mine site. Most of that is on bitumen road. So the infrastructure here is excellent. We've got a bore field, a water extraction license that covers more than twice of our water requirement for the project. The mining license is granted. So this is a fully-permitted situation. The only infrastructure we need to build is a power line spur from the substation at the nearby town of Karibib, which is about 25 kilometres away.

Next slide, please.

This reserve and resource statement here is really quite unique. It's the, we believe, the only reserve and resource of caesium and rubidium as well as lithium globally. So the main ore of caesium and rubidium is pollucite. There are very few known occurrences of it globally, and most of those have been depleted. So lepidolite suddenly becomes a new potential ore of caesium and rubidium. And these are two of the 35 critical minerals on the US State Department's list of critical materials. And importantly, they're a subset of 14 that the US is a hundred per cent reliant on imports for, and we've got the only significant undeveloped deposit of these two metals.

But the main metal of interest here is lithium. We will also get value from the potassium in the form of SOP fertilizer. The ore reserve is nearly 7 million tons, which gives us a project life, a production life, of 14 years. But there is also a significant inventory of material in mineral resource outside of reserve that we will be looking to evaluate for a potential phase two project.

But our main focus at this point in time is on phase one. Importantly, these mines, they've been depleted as I mentioned, of other minerals. The strip ratio is extremely low. That historical mining has partially pre-stripped these deposits. So, for the first two years, our strip ratio is just 0.5 to one. And over the 14 year project life, 3.8 to one.
All of the infrastructure on site is in place. The haul road out to the satellite deposit at Helikon, the water pipeline, all of that water infrastructure is developed, so that the actual requirements for developing the mines is minimal.

Next slide, please.

So the other piece of infrastructure that we need to develop on the site is the concentrator. This employs very conventional flotation technology. Mica minerals are flat flaky minerals that lend themselves to flotation and we get extremely high extraction rates and recovery to our lepidolite concentrate, even on lower-grade materials. So on good grade lepidolite, we'll get recoveries of over 90%. On lower-grade Lithian Muscovite material, we'll get recoveries around 80%.

Next slide, please.

So that concentrate from Namibia will then be shipped to the chemical plant that we plan to build in Abu Dhabi. The reason for locating this in Abu Dhabi is the plant will consume a reasonable quantity of sulfuric acid and Abu Dhabi is the world's largest producer of sulfur, which is the key compound for making sulfuric acid. Abu Dhabi also has other benefits. We're looking at building this on a large industrial park, which is an industrial-free zone. So there's no tax there. There's affordable power. There's an abundance of affordable gas. And also, there are markets in the region for our bulk byproducts. So we'll produce SOP fertilizer. There's about 100,000 tons a year of that imported into the Middle East. And we'll be the only local supplier or manufacturer of around 12,000 tons a year. And we'll also produce an amorphous silica, which can be used in the construction industry. And there's a substantial amount of construction, particularly in Abu Dhabi and Dubai.

But focusing in on our L-Max technology. This has now received patent protection in Australia, Europe, Japan, and the United States. We're still waiting for Canada to come through. And importantly, L-Max is differentiated from other hard rock processing technologies because it's purely hydrometallurgical. There is no energy-intensive, pyrometallurgical front-end to this process. So spodumene conversion, the first step there is a roast step to over a thousand degrees Celsius followed by a high-temperature calcination. Our highest temperature is 120 degrees Celsius in that initial leech. And that's an exothermic reaction, so we use very little energy in this. The whole process plant uses conventional equipment and reagents that are really ubiquitous in the mineral processing and chemicals industries. Importantly, also, the process operates at atmospheric pressure.

I've mentioned these byproducts, most other lithium processes do not enjoy a suite of byproducts like these that we have. And we see this technology is also being scalable. Our phase one plant is very deliberately scaled at 5,000 tons a year of output to make it a manageable scale up from our piloting. So it's about a 460 times scale up. A second plant or a third plant, we envisage, could be quite a lot bigger.

Next slide, please.

The other process technology that we employ in this plant is called LOH-Max. And the reason why we've separated these technologies is LOH-Max has a much broader application than L-Max, which is specific to lithium mica within phosphate minerals. LOH-Max fits in the backend of the plant and takes the lithium sulfate produced from L-Max and converts that to a high-purity lithium hydroxide. For conventional spodumene processing, the intermediate product there is lithium sulfate. So LOH-Max has application in spodumene.

About a month ago, we published the results of an assessment that we've done in that in the application of LOH-Max for spodumene conversion. It produces or allows an increase in recovery over conventional processing of about 4%. For a typical 20,000-ton-a-year spodumene converter, a significant capital cost saving of estimated at over $50 million and an operating cost reduction of around $8 million per annum. Importantly, it also consumes less energy and has a lower carbon intensity and lower carbon footprint. In doing an economic evaluation around this, employing LOH-Max for a conventional 20,000-ton-a-year spodumene converter implies a value uplift of around $100 million for a project with a 10-year mine life. Importantly, the waste from the plant is predominantly gypsum and benign.

The process does not produce byproduct sodium sulfate. A real risk that we see for a conventional spodumene conversion going forward and for other Hardrock projects is the growing production of sodium sulfate, which is a very mature market globally. And you can't dispose of this. It's highly soluble and it will get out into the environment if you try to put it into a tailing storage facility. Our process negates the production of sodium sulfate and therefore that risk.

Next slide, please.

So you can see here the investment fundamentals for the phase one project. A NPV of over US$220 million. An internal rate of return of over 30%. Payback is just over three years, and you can see there, it will produce on average over the mine life just under 5,000 tons of lithium hydroxide, but very meaningful quantities of the strategic rubidium and caesium compounds. I'll get to cash costs in a minute. We're very competitive on the global cost curve.

Next slide, please.

So the capex for this project is $139 million. About a third of that is in Namibia, mainly in the concentrator. Two-thirds for the chemical plants in Abu Dhabi. And that includes a 13% contingency.

Next slide, please.

You can see here the production profile. We've assumed a three-year ramp up. First production, we're targeting in 2023. That assumes the final investment decision in the second quarter of next year, with two years for getting into commercial production in the first half of 2023. We then do have a growing grade profile over the first five years of the project. And we expect that we'll be able to extend this project by converting resources into reserves.

Next slide, please.

You can see here where we sit on the global cost curve for lithium hydroxide. This is Benchmark Mineral Intelligence's cost curve. This is after credits from byproducts. The byproducts are an important part of this, they represent over 30% of revenue, however, even before byproducts, if we ignore those, we're still competitive with spodumene production.

Next slide, please.

Here you can see some of the really differentiating points of our technology from an ESG perspective. Very low carbon intensity, very low water usage, land use intensity is low. All of these are really important to be able to get projects permitted and funding in today's environment. And we've got good social impacts with substantial job creation, particularly in Namibia.

Next slide, please.

Finally, and transitioning project to development and implementation. We're fully permitted in Namibia. Permits in Abu Dhabi should be coming through later this quarter or early next quarter. We've got off-take arrangements with BASF under a letter of intent for the lithium hydroxide, and we're working on similar arrangements for caesium and rubidium. We also, a couple of weeks ago, announced a mandate arrangement for debt funding from the United States Government's Development Finance Corporation.

So, in the interest of time, thank you very much. And if you've got any questions, then please don't hesitate to reach out and contact me at Lepidico. Thank you.


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