Lithium Americas' Cauchari-Olaroz feasibility study confirms "favourable" economics

Lithium Americas Corp. (TSE:LAC)(OTCQX:LHMAF) Monday announced the results of an NI 43-101 compliant definitive feasibility study for its Cauchari-Olaroz lithium and potash brine project in Argentina.
The property has proven and probable reserves sufficient to operate at a production rate of up to 40,000 tonnes per annum (TPA) of lithium carbonate for 40 years, the company said, and up to 80,000 TPA of potash, which would include an initial five year ramp-up period.
Lithium Americas said the low operating cost and large brine reserves of the project compare "very favourably" to existing lithium carbonate producers, and suggest that the company has the potential to become one of the largest and lowest cost lithium operations in the world.
The company's plan is to build the project in two stages, with each stage consisting of a 20,000 TPA lithium carbonate facility and a 40,000 TPA potash facility.
"Completion of the feasibility study is a significant milestone for the development of our Cauchari-Olaroz project," Lithium Americas' president and CEO Waldo Perez said.
"We have now confirmed that our battery grade lithium carbonate operating costs will be one of the lowest in the industry, that our reserve estimate is large enough to allow us having an extremely long project life, and that our project is projected to generate robust financial returns.
"This is the result of 3 years of hard work that has allowed us to identify a world class project in an industry with significant expected demand growth over the foreseeable future."
The study was prepared by the independent engineering firm ARA WorleyParsons, the hydrogeologic modelling experts AquaResource, a division of Matrix Solutions, and by hydrogeology expert Groundwater Insight.
Highlights of the base case feasibility study include a pre-tax net present value, at an 8 per cent discount rate, of US$738 million and a pre-tax internal rate of return of 23 per cent.
Net cash operating costs per tonne of lithium carbonate are seen at US$1,332. Overall project revenue is projected at US$6.6 billion and project EBITDA is pegged at US$4.3 billion.
Initial capital expenditure (capex) for lithium is seen at US$269 million, while initial capex for potash is anticipated at US$45 million.
Revenue generation for the project is due to start in 2015, Lithium Americas said.
Lithium Americas' Cauchari-Olaroz project is the third largest lithium brine resource in the world according to available public records of resources and reserves.
An updated reserve and resource summary gave a measured resource of 576,000 tonnes lithium, 3.04 million tonnes lithium carbonate and 9.14 x 10(8) cubic metres of brine. The indicated resource was 1.65 million tonnes lithium, 8.7 million tonnes lithium carbonate and 2.89 x 10(9) cubic metres of brine.
Meanwhile, the potassium reserve and resource summary gave a measured resource of 4.7 million tonnes, 9 million tonnes of potash and 9.14 x 10(8) cubic metres of brine. The indicated resource was 13.8 million tonnes potassium, 26.3 million tonnes potash and 2.89 x 10(9) cubic metres of brine.
Potash will be produced as a by-product of lithium brine processing, with both lithium carbonate and potash to be produced in two steps.
The first step utilizes a solar evaporation process to concentrate lithium in the brine and precipitate potash and other salts in large-scale ponds.
The solar evaporation process significantly reduces operating costs with respect to hard rock mining, and takes only 180 days on average in the Cauchari salar, the company said.
The second step utilizes the processing facilities, which transform the concentrated lithium brine into lithium carbonate, and separate the potash from the other salts.
Potash concentrates in the ponds will be seen in volumes large enough to be harvested after two years of the production of lithium, hence the potash plant construction is delayed with respect to the lithium carbonate plant.
Once the ramp-up stage is complete, lithium carbonate is expected to represent around 88 per cent of the project's total revenue, while potash is expected to represent around 12 per cent of the project's total revenue.
Of the 40,000 TPA potash production for stage 1, the company is expecting to sell 10,000 TPA domestically within Argentina, and export the remaining 30,000 TPA to Brazil.
Total cash operating costs are seen at US$1,876 per tonne of lithium carbonate and US$249 per tonne of potash.
The company said the second development stage is not expected to start until 2018, and will be the subject of a separate study, which is anticipated to "improve the already robust project financials for stage 1."
No estimated financial results associated with stage two were included in the feasibility study results released Monday.
Lithium Americas said the next steps for the project include detailed engineering, the receipt of final environmental permits and the negotiation of project financing and agreements with strategic partners.
Further information on the company and the Cauchari-Olaroz lithium and potash brine project can be found at: http://www.lithiumamericas.com/