AVZ lets the numbers do the talking at its Manono lithium-tin project
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Special Report: Despite taking a conservative approach, AVZ has outlined a compelling set of numbers in the definitive feasibility study for its massive Manono lithium and tin project.
The project in the Democratic Republic of Congo is expected to generate post-tax net present value (NPV) of just over $US1bn ($1.58bn) and internal rate of return (IRR) of 33 per cent.
Both NPV and IRR are measures of a project’s anticipated profitability.
AVZ Minerals (ASX:AVZ) also estimated net profit after tax at $US3.8bn and a post-tax payback period of 2.25 years from the project, which features conventional open pit mining with a low ore:waste strip ratio of 1:0.48.
Capital expenditure has been estimated at $US545.5m, which includes a contingency of $US49.59m, while annual earnings before interest, taxes, depreciation, and amortization have been estimated to average some $US380m for life of mine.
The project is expected to produce 700,000 tonnes of spodumene concentrate per annum with 153,000 tonnes of concentrate used to produce 46,000 tonnes per annum of primary lithium sulphate.
“The DFS proves the Manono lithium and tin project to be a very robust project with strong financial metrics, demonstrated by the key metrics of the DFS base case scenario on a 100 per cent ownership basis,” managing director Nigel Ferguson said.
“The Manono project has a substantial ore body capable of extending the life of mine well past the current 20 years, as modelled.
“It also has a robust workable transport solution for securing delivery of products to the export ports and a clear plan to work with the community for social development and environmental compliance.”
Ferguson noted the company has been conservative in its interpretations of financial impacts on the project and believes that the numbers can be improved in the future despite including some significant, non-project infrastructure.
“The Manono project economics are enhanced by the addition of the high-value primary lithium sulphate project. The project is also highly sensitive to the market pricing of SC6 (lithium concentrate),” he added.
“Roskill has stated its 20-year price forecast for lithium concentrate sees an increase in unit value as demand increases and as such, the project becomes incrementally more robust and profitable.”
There is also upside potential from the Carriere de L’Este deposit, added cash flow from tin and tantalum credits, additional negotiations to reduce transport pricing and the establishment of the Special Economic Zone at Manono, which could provide discounted rate on taxes and duties.
Last month, the company flagged the potential to reduce operating costs after successfully recovering both tin and tantalum during metallurgical test work.
This followed the company’s phase two flotation tests, which returned consistent recoveries averaging 69 per cent lithium after adjusting for losses to slimes, magnetic separation and flotation tailing.