Updated Definitive Feasibility Study: Lithium hydroxide production significantly improves profitability of Keliber’s Lithium Project

The economic calculations of Keliber Oy’s Definitive Feasibility Study for the lithium hydroxide production show a significant improvement in profitability.

Keliber Oy’s (“Keliber” or “the Company”) updated Definitive Feasibility Study for the lithium hydroxide production (“updated Definitive Feasibility Study” or “updated DFS”) confirms Lithium Project’s (“the Project”) strong financial and technical feasibility. All the key financial figures have improved significantly compared to the Definitive Feasibility Study based on lithium carbonate production (“DFS”) published in summer 2018. Keliber’s Lithium Project shows a pre-tax NPV (8 % discount rate) of MEUR 510, a pre-tax IRR of 28 % and payback period of 3.7 years. The pre-tax NPV is now 73 % higher, pre-tax IRR 17 % higher and pre-tax payback period 49 % shorter than in the lithium carbonate DFS published in summer 2018.

2019 03 04 100017“The strong economics of lithium hydroxide production show that our environmentally sustainable production process is economically viable. We believe that the strong economics will have a positive impact on the financing of our construction phase, as well as the completion of customer negotiations. Our project is important on a European scale and locally. We will be an important and essential part of future European lithium value chain supporting Europe’s need for domestic supply of critical raw materials. Our planned investment is one of the biggest investments in Central Ostrobothnia for decades. Our future production will directly employ about 150 people, with the multiplier effect on employment being even greater,” says Mr. Pertti Lamberg, CEO of Keliber Oy.

The key financial figures and data for the updated DFS are presented in this release. The company will publish an updated Executive Summary by the end of the first quarter (Q1 2019).

Updated key figures and conclusions

Keliber published the Definitive Feasibility Study for the Lithium Project in summer 2018 based on the production of battery-grade lithium carbonate. However, the Company estimated that lithium demand, especially from the cathode chemical, lithium-ion battery and electric vehicle manufactures locating in Europe, will move quickly to lithium hydroxide and the Company commenced a test program related to production of lithium hydroxide together with Outotec Finland in autumn 2018.

The Company completed the pilot-tests included in the test program by the end of 2018. During the pilot-tests, battery-grade lithium hydroxide was produced successfully. All the technical and economic studies related to the pilot program have now been completed. The changes made to the production process only concern the downstream part of the chemical plant in Kokkola and are small. The annual design capacity for the production of lithium hydroxide will be 12 500 tonnes, about 1 500 tpa higher than the previous planned production of lithium carbonate.

The updated DFS of Keliber’s Lithium Project shows a pre-tax NPV (8% discount rate) of MEUR 510 (73 % increase), a pre-tax IRR of 28 % (17 % increase) and payback period of 3.7 years (49 % shorter). The Project has potential to generate total life of operations revenues of MEUR 3 060 (34 % increase) and operating cash flow of MEUR 1 945 (60 % increase).

The total project development capital cost (“CAPEX”) is MEUR 313 (23 % increase). The direct investment cost estimate for the mines, concentrator, tailings storage facilities, chemical plant and closure costs is total of MEUR 236.

The total unit operating cost for lithium hydroxide tonne based on production from Keliber ore averages EUR 4 125 which makes Keliber one of the low-cost producers of lithium hydroxide. As the Project life is extended 7 years by purchasing concentrates from third parties the operating cost (“OPEX”) will be higher. The estimated OPEX per tonne of lithium hydroxide, including the purchased concentrate, during the full life of operations is EUR 4 541.

The market demand for lithium products is strong, which is reflected in the selling price for lithium hydroxide. In the updated DFS, the sales price estimates for the battery grade lithium hydroxide were delivered by Roskill Consulting Group Ltd (“Roskill”). Roskill forecasts that annual price (in real terms) for battery grade lithium hydroxide range between US$ 12 470/t and US$ 15 742/t from 2019 to 2032. The average price being US$ 14 142.

Highlights of the updated DFS outcomes are provided below. All figures are quoted in euros (EUR, €) and represent for expected life of operations (20 years), unless otherwise specified. The exchange rate used in the calculations is 1.00 € = 1.18 US$.

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“The demand for lithium is expected to grow very strongly, up to 17.9 % per year, until to 2032. Demand growth for battery-grade lithium hydroxide is expected to be the strongest among all the lithium products, 44.3 % per year between 2017 and 2027 and 15.4 % per year between 2027 and 2032, respectively. The increase in demand for lithium hydroxide is a result of the shift in battery cathode chemistry used by the automotive industry towards to the so-called high-nickel content chemistry. This change has been very fast. We see the European lithium value chain transforming extensively due to electrification of transport and the strong contribution of the European automotive industry in electrifying their fleets. We see signs that the chemical industry is also investing in lithium battery chemicals manufacturing in Europe, and we are entering the market at the right time to serve Europe's fast-growing markets,” says Mr. Lamberg CEO of Keliber.

Mineral resource and ore reserve estimates

The Company has continued its drilling program after the publication of the DFS in June 2018 and has drilled in total over 18 000 meters in the areas of Syväjärvi, Rapasaari and Emmes deposits as well as in Päiväneva target. The Company has not included results from these drillings in the mineral resource and ore reserve estimates of the updated DFS.

 Keliber Oy's mineral resource estimates, using a 0.50 % Li₂O cut-off grade, was published on May 16, 2018. The JORC 2012 compliant measured and indicated mineral resources are 9.473 Mt grading 1.16 % Li₂O. Including the inferred mineral resources, the total mineral resources of the company are 10 million tonnes. The mineral resources have been estimated and reported in accordance with the guidelines of the Australasian Code for the Reporting of Mineral Resources and Ore Reserves (JORC Code 2012) by the independent Competent Persons Markku Meriläinen (MAusIMM) and Pekka Loven (MAusIMM, CP).

The recoveries of the lithium hydroxide, tonnes produced, and prices of the final product were taken into account in the updated DFS. These had an effect in the cut-off grade of the open pit ore (change from 0.45 % Li₂O to 0.40 % Li₂O). Small increase in the ore reserve estimate is a result of the additional ore blocks located inside the earlier open pit block model. The DFS outlines a combined open pit and underground mining. The combined open pit and underground proven and probable reserves, using a 0.40 % Li₂O cut-off grade for open pit ore reserves and a 0.7 % Li₂O cut-off grade for underground ore reserves, are 7.459 Mt grading at 1.04 % Li₂O. Ore Reserves are included in the Mineral Resources. The ore reserve estimates have been prepared according to the guidelines of the JORC Code 2012 by Pöyry Finland Oy by competent persons under the supervision of Ville-Matti Seppä MSc (Geology), EurGeol acting as the qualified person.

“Our systematic exploration and drilling program after the June 2018, has produced good results and show the existing ore potential of the Central Ostrobothnian lithium province. We will continue our drilling program and update our mineral resource estimates later during 2019, “says the Company’s Chief Geologist Mr. Pentti Grönholm.

Lithium hydroxide process

The Company’s overall flowsheet for lithium hydroxide production comprises a conventional spodumene concentrator, concentrate converter and a soda pressure leach process. The process has been proven at pilot plant scale.

The concentrator plant will be in Kalavesi, Kaustinen, five kilometres from the municipality centre. The concentrator is designed for ore throughput of 600 000 tpa (nominal value). The chemical plant for the lithium hydroxide production will be in Kokkola Industrial Park (“KIP”). The design capacity for annual battery-grade lithium hydroxide production is 12 500 tonnes.

During the efficient and sustainable production of lithium hydroxide, two by-products are obtained, namely analcime sand in chemical plant and quartz-feldspar sand in the concentrator, which could potentially have a commercial value. Analcime sand could be used as a construction material, as a fill material at the Port of Kokkola and in water treatment. Test work related to the use of the quartz-feldspar sand as filler material in concrete, mortar, plaster and asphalt has been carried out.

“Our clean-tech soda pressure leaching process is planned and designed in close co-operation with Outotec. We are pleased with the results we have reached during the lithium hydroxide test program from the economic, technological and environmental perspectives. The commercial and environmental benefits we obtain from the chosen processing route are notable also for the lithium hydroxide production. The change from lithium carbonate to lithium hydroxide increased our capital expenditures, but lower operational costs per produced ton and the end-product that meets customers needs better, are such benefits, that there is no question about the selection of our future end-product,” says Chief Production Officer of the company, Mr. Manu Myllymäki.

Construction financing

The main purpose of the updated Definitive Feasibility Study is to qualify the company’s Lithium Project for construction financing. Keliber continues together with the appointed financial advisors the various activities to ensure optimal combination of debt and equity for the Project.