It is on. Firefinch and friends have come to a final investment decision (FID), green-lighting the economically exciting Goulamina lithium project in Mali, West Africa.
The FID should come as no surprise to anyone following this madhouse story – given the updated definitive feasibility study released in early December more than doubled previously estimated returns.
Now Goulamina is expected to generate pre-tax net present value (NPV) of $4.1bn and post-tax internal rate of return (IRR) of 83%. Both NPV and IRR are measures of a project’s profitability.
In this case, rather good measurements, but a little conservative…
Even these numbers might be conservative given that Firefinch (ASX:FFX) and their partners – Jiangxi Ganfeng Lithium (Ganfeng) – had based their calculations on a conservative spodumene concentrate price of US$1,250/tonne real applied for the first five years of production – and a long-term weighted average of US$900/tonne real applied for the balance of the mine life.
Highlighting this, Benchmark Mineral Intelligence noted in November 2021, the US$1,250/tonne is now the low point of recorded sales. At Pilbara Minerals (ASX:PLS) the pricing in the December quarter would be at the high end of previous guidance (US$1,650 to US$1,800 per dry metric tonne).
You can waive that goodbye
Both Firefinch and Ganfeng have agreed to waive the FID condition to the payment of the final US$91 million upon the formation of the incorporated Joint Venture (Goulamina JV) while the remaining condition to its formation is the transfer of the Project Exploitation Licence to a single Malian subsidiary.
Firefinch is currently reorganising its subsidiaries to permit this transfer, which is expected in early 2022.
It’s a Goulamina JV
This will allow the formation of the Goulamina JV, the payment of the final US$91 million of Ganfeng’s US$130 million contribution, and the release from escrow of the US$39 million first payment made last year.
Ganfeng has also agreed to provide Firefinch with either $40m in debt or arrange for up to US$120m in third-party debt – up from the previous US$64m – to account for the increase in capital cost for the initial 2.3Mt per annum from US$194m to US$255m.
“The approval of FID represents yet another major milestone for the Goulamina Project,” managing director Dr Michael Anderson said.
“Clearly the outcomes of the DFS Update have been extremely compelling to the Boards of both companies and it is a testimony to the project’s credentials that the partners have moved so quickly and collaboratively to commit to the development of Goulamina.”
Goulamina: the home of so very much spodumene
Goulamina is expected to produce 506,000t of spodumene per annum initially before ramping up to a peak of 880,000t, which is expected about 18 months after the commissioning of the first stage.
Funding for Stage 2 will be disclosed once the JV is online.
Drilling is currently underway to convert much of the current inferred resource of 43.7Mt grading 1.53% lithium oxide to ore reserves.
Early-stage engineering works, sterilisation drilling and site-based activities are underway.
Firefinch is demerging its interest in Goulamina into a new ASX listed company, Leo Lithium Limited, but will retain exposure in the project by holding 20% of the issued capital of Leo following the demerger.
This article was developed in collaboration with Firefinch, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.