Rodinia Lithium (CVE:RM) (OTCQX: RDNAF) said Thursday that it has started the construction and operation of a pilot production facility at its Salar de Diablillos lithium brine project in Salta Province, Argentina.
The purpose of the pilot production facility is to confirm the proposed process outlined in the recent preliminary economic assessment for the project, with results to be included into a feasibility study.
The facility is to produce battery-grade lithium carbonate on site, including production of by-products potash and boric acid, giving a glimpse of how a potential final production facility would operate.
In November 2011, the company's preliminary economic assessment for Diablillos indicated a potentially low cost operation with a net present value as high as US$964 million, and a mine life of greater than 20 years.
The report outlined two production scenarios, the first being an operation producing 15,000 tonnes of lithium carbonate and around 51,000 tonnes of potash per year, and the second producing an increased 25,000 tonnes of lithium carbonate and 85,000 tonnes of potash per year.
The first base case scenario returned a pre-tax net present value of US$561 million, and an internal rate of return (IRR) of 34 percent at an eight percent discount rate and a lithium carbonate price of US$5,500, while the second alternative projected a much higher net present value of US$964 million, along with a pre-tax IRR of 36 percent.
Capital costs were kept low due to an initial unlined evaporation pond, and a planned lithium carbonate plant offsite at an industrial park in Pocitos, with infrastructure, natural gas and power already in place.
Operating costs per tonne, excluding potash and boric acid credits, were projected to be as low as $1,519 per tonne of battery-grade lithium carbonate for the base case, and $1,486 per tonne for the 25,000 tonne per year alternative. This is for a product that currently sells for north of $6,000 per tonne.
Including co-product credits that exceed the costs to produce lithium carbonate, combined operating costs were brought below zero, at negative $703 per tonne for the base case scenario. This means lithium carbonate could be stockpiled, and the company would still make money from potash and boric acid sales.
The projected internal rate of returns for the property are the highest when compared to other players in the region, including Lithium One (TSE:LI), Lithium Americas (TSE:LAC), and Orocobre (TSE:ORL).
Earlier this month, Rodinia announced the start of drilling the first production well at its Salar de Diablillos lithium brine project.
“In conjunction with initiating our first production sized well, Rodinia has initiated work to complete the construction and operation of a pilot production facility that is anticipated to produce boric acid, potash and battery grade lithium carbonate on site,”said president and CEO, William Randall.
"The three phase program allows us to work out any potential problem areas before we reach that phase in our larger lined pond system, allowing the company to develop the project more aggressively.
"In addition to confirming the processing flow sheet, the pilot production facility will allow us to demonstrate the potentially low production costs estimated in the recent PEA.”
The proposed operation for Diablillos will use conventional evaporation-based processing, similar to other lithium brine projects (considered the more economical and environmentally friendly process as opposed to hard rock), as brine is to be pumped from subterranean aquifers by a series of production wells to an initial unlined evaporation pond to increase concentration.
High grades and recovery rates, favourable lithologies, low magnesium ratios and high specific yield rates are required to ensure enough contained brine will drain out of a formation by pumping.
The pilot program is divided into three phases. The first will determine seasonal evaporation rates and the natural chemistry of the Diablillos brine through the use of six standard evaportion pans, each four feet in diameter and 25 centimetres tall, buried in the ground near the existing weather station.
The final concentrated brine will be used to conduct bench testing and process evaluation to maximize the recovery of lithium, the recovery of potassium and boron co-products, as well as to determine the size of production ponds, the company said.
Meanwhile, phase two of the program will involve evaporation pools, which will provide a large volume of concentrated brine for bench tests. Ten evaporation pools, each 10 square metres in area, have been installed next to the evaporation pans.
The pools have been filled with brine from a well located in the proposed production field, as noted in the preliminary study.
Bench-scale processing of the concentrated bittern from these pools will look to further define the processing scheme tested in phase one, and refine the economic aspects of the process flow sheet, Rodinia said.
Finally, phase three of the program will see bench scale process testing ramped up to large pre-production volumes through the construction, filling, evaporation and processing of brine in large pilot evaporation ponds.
Initially, brine from the production well will fill the entirety of the pond area, and as evaporation occurs, the brine will be concentrated in a larger initial pond as it reaches saturation. The ponds will then be used to outline the proposed process to isolate sodium, potassium, and magnesium salts, and produce a concentrated lithium-rich bittern.
In addition, the company is also exploring to define a suitable area of the Salar's surface for an unlined pond, which will have minimal leakage, with this pond anticipated to be the largest of the commercial production ponds - and used for the primary evaporation stage.
A pilot plant will be designed and assembled on site, and will be expected to process the resultant lithium-rich bittern.
The Salar de Diablillos property, which rests about 145 kilometres southwest of the city of Salta, has a recoverable inferred brine resource of 2.8 million tonnes lithium carbonate equivalent from an in-situ inferred brine resource of 4.9 million tonnes lithium carbonate equivalent.
The Salar lithium recovery process is a combination of solar evaporation steps, in-field brine treatment, by product potash and boric acid recovery and chemical processing to produce lithium carbonate, resulting in a high lithium recovery of approximately 65 percent.
The process contemplates a series of six ponds from largest to smallest, where the largest is used to bring brine to saturation and is designed to be unlined reducing the capital cost of pond construction, the company said. Rodinia also said there is natural clay occurring near Diablillos that will allow for the construction of the initial pond, offering cost savings over lined ponds.
Lithium's characteristics make it suitable for a number of uses, but for many years, the metal was used mainly in the production of ceramics, glass and as a strong aluminum alloy. However, demand for lithium has since boomed due to the advent of the rechargeable lithium-ion battery, used in anything from watches and cell phones, to BlackBerrys, iPods and for electric vehicles, power tools and military equipment.
Throughout 2012, Rodinia will focus on continuing to develop the Diablillos project by completing additional drilling and advancing through feasibility study. Also on the horizon for 2012 is an updated resource estimate for Diablillos.
In addition to its Argentina project, Rodinia holds 100 percent mineral rights to approximately 70,000 acres in Nevada's lithium-rich Clayton Valley in Esmeralda County, placing it in a prime position to benefit from increasing lithium demand.