Lithium Americas aiming to become world’s lowest cost lithium producer

Lithium Americas (TSE:LAC, OTCQX:LHMAF) is developing the third largest, and one of the world’s lowest cost lithium operations at Cauchari-Olaroz in northern Argentina.  The Company is looking forward to completing a Definitive Feasibility Study in the first half of 2012, and then commencing construction of the production facilities.
The Company recently completed bench scale testing at SGS Mineral Services in Lakefield, Ontario, and is now constructing an on-site pilot plant that is scheduled for completion in the current quarter. The plant is expected to produce 30 kilograms of 99.5% pure lithium carbonate per day.
Lithium Americas is the only lithium development company in the region that maintains a full analytical lab on site and includes top of the line analytical equipment like Atomic Absorption Spectrometers. This equipment can instantly measure all of the elements contained in recovered brine, and is monitored by assayers from Alex Stewart, who are a global provider of assay services to the resources industry.
The lab is capable of analyzing 50 full samples per day, and includes measurements for lithium, sodium, potassium, calcium, magnesium, boron, sulphates, and chlorides, as well as physical parameters including pH balance and conductivity, with all samples additionally verified by certified international labs.
The facility is capable of housing up to 20 people and maintains a full time engineering team of 6 professionals and 10 technicians, with over 60 years of combined experience in the recovery and processing of lithium. They operate from an onsite engineering lab that contains full thermodynamic modeling capabilities, and is capable of producing lithium carbonate at bench scale.
The Company recently completed a full cycle of evaporation studies from its industrial scale ponds. These due diligence studies extended over a period of 180 days, and produced approximately 15 tonnes of concentrated lithium brine.
Brine production was in line with estimates compiled in the Preliminary Economic Assessment, with final processing completed off-site utilizing the pilot plant. This plant has now been deployed to Cauchari-Olaroz for ongoing production of lithium carbonate that will be supplied to potential customers for qualification studies.
A Thermodynamic Model was completed and now allows for accurate predictions on the changes within the brine, as it moves through each stage in the process cycle from well extraction, evaporative cycle, and production of lithium carbonate at the process plant.
The final hydrological model is in the construction phase and will establish the number of wells required in full production mode. The model will also convert resources into reserves, establish the water balance of the underlying salt lake, and the final life cycle of the mine.
Four production wells were utilized to evaluate the yield potential of the brine aquifer, with positive pump tests yielding up to 25 litres per second. A fifth well tested the freshwater aquifer and produced positive results yielding 40 litres per second.
The flow rates identified in three of the four production wells were more than double the estimates used in the PEA, which estimated a total brine production rate of approximately 400 litres per second, to produce 20,000 tonnes per year of lithium carbonate drawing upon 40 production wells. The number of production wells needed to produce the same tonnage of lithium carbonate should now drop in half, and this data will be fully evaluated in the DFS.  
The PEA indicated that the lithium carbonate processing plant would require approximately 60 to 80 litres per second of low quality freshwater, and estimated that 6 wells would be required to service this need. The current round of testing confirmed that a smaller number of wells could meet the process plant water requirements.
These tests confirm that fewer production wells will be required to extract brine, and the presence of significant quantities of freshwater in close proximity to the mine site will significantly reduce both the capital and cash operating costs that were set out in the PEA. Many lithium mines suffer from lack of a local water source and are required to ship brine concentrate to a process plant that is located some distance from the mine, driving up handling, transport and capital expenses.
Cash operating costs to produce a tonne of lithium carbonate were previously calculated at US$1,434, which is believed to be the lowest cost estimate for worldwide lithium brine production. This estimate will be subject to further downward revision as the cost of operating fewer wells, and the application of a potash credit is taken into account.
Potash tests have confirmed that 2 tonnes of potash can be harvested from the brine evaporation ponds for every 1 tonne of lithium carbonate that is recovered.  Approximately 1.5 tonnes of potash rich salts were harvested during the recently completed full evaporation cycle testing, and may provide a significant revenue and cash flow boost to the overall economics of the Project. The Company also intends to define the commercial viability of other brine by products such as boron, during the completion of the DFS.
Lithium Americas shipped 300 kilograms of potash to Saskatchewan Research Council labs in Saskatoon, to evaluate the production of potassium chloride at 95% purity, which can be sold as fertilizer. Results are expected in the current quarter.
Chemical sampling confirmed that after extracting significant amounts of brine, the chemical composition of the remaining brine stayed very stable. This continuity applied across extensive hydraulic capture zones provided a high degree of confidence in the resource estimate.
The PEA estimated a staggered two stage development in lithium carbonate production, commencing at 3,000 tonnes per year in 2014, and building up to 20,000 tonnes per year in 2016. A mine upgrade would then see production gradually increase to 40,000 tonnes per year by 2019.
Management is now evaluating the production of up to 80,000 tonnes per year of potash, and possibly some additional by products.
The recently completed PEA determined a pre-tax Net Present Value of the Cauchari Project at US$983 million, based on an 8% discount rate, and lithium carbonate price of $5,500 per tonne. The capital cost to complete the construction of the first production phase rated at 20,000 tonnes per annum of lithium carbonate is estimated at $217 million, and the second phase boosting production to 40,000 tonnes per annum adds $182 million to capital expenditure
Annualized revenues are expected to kick off in 2014 at $18.0 million, and produce an EBITDA of $10.5 million, reach $116.0 million, and produce an EBITDA of $78.4 million in 2016, and reach maximum operating capacity in 2019, producing revenue of $224.0 million, and an EBITDA of $155.1 million.  
These estimates do not take into account the production of potash or additional by products, with potash prices falling into a price range of US$350 to US$500 per tonne, may provide significant additional revenues and free cash flow.
The mine is expected to have an extremely long life, taking 40 years to exhaust 50% of the currently defined NI 43-101 compliant resources, which currently cover approximately one third of the property package.