Special Report: A cracking pre-feasibility study (PFS) into the San José project in Spain emphasises a long life, low cost operation which – crucially — has the potential support of major EU institutions like the European Investment Bank.

San José is Infinity Lithium’s (ASX:INF) long life, high margin lithium hydroxide project in Spain, a stone’s throw from Europe’s accelerating lithium-ion battery sector.

The project already stood head-and-shoulders above its peer group on a number of key metrics.

But this PFS has confirmed, and actually improved upon, the robust technical and economic outcomes of a scoping study, released November last year.

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Compared to the scoping study, PFS nameplate capacity has improved by 1000tpa to 16,500tpa across a longer, 30-year production life.

The San José PFS also shows exceptionally low operating costs of $5,434/t, which puts the 15,000-tonne-a-year lithium hydroxide project in Spain among the world’s best.

Here’s how that compares to its peers:

A pre-tax net present value (NPV) of $US860m and very attractive internal rate of return (IRR) of 42.3 per cent means a project payback period of just two and a half years, the company says.

IRR and NPV are used to estimate the profitability of a potential operation – the higher they are above 0, the better they are.

Total profits over the initial 30-year project life would be $US3.7 billion from total revenues of about $US6 billion.

Pre-production capital expenditure is estimated at $US309m, which includes a contingency of $US42m to cover any additional unforeseen costs during construction and ramp up.

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Europe: crying out for locally produced raw materials

This is a robust project in the low sovereign risk investment destination of Spain, which enjoys an established and transparent mining law, no government royalties on mining, and a low tax rate.

The region is extremely well endowed with infrastructure and the project is a recipient of adjoining electricity, road, water and gas infrastructure.

But crucially, the project is also close to European lithium-ion battery end markets, which are rapidly developing to support the burgeoning EU EV industry.

Recently, major European based companies like Umicore, BASF and Johnson Matthey have announced plans to construct cathode production facilities to start in the early 2020s which will require significant amounts of lithium.

By 2021, Bloomberg New Energy Finance forecasts that Europe will already be the 3rd largest cathode producer in the world after China and Japan.

There is currently no lithium extraction and conversion in Europe, but by 2030 — based on its EV targets — the region will require more than 250,000 tonnes of lithium chemicals to be produced domestically.

And the European Union and the European Commission have publicly stated that they are willing to support and provide capital to develop lithium production in Europe.

The low cost, long life San José project will be essential to the European Commission’s goal of securing critical lithium chemicals, Infinity managing director Ryan Parkin says.

“The value of the project is significant with a pre-tax NPV10 of US$860m and an attractive IRR of 42 per cent over an extended project life, which, when coupled with the potential support of major European institutions such as the European Investment Bank, provides confidence for the development of the flagship lithium chemicals project within Europe,” he says.

“The project presents the potential for exceptional multi-decade employment positions and tax revenues that are largely retained within the region of Extremadura, whilst also providing a world class beacon for complimentary activities in lithium-ion battery production and technologies in the region and throughout Spain.

“San José retains unique sustainability characteristics that further compliment Europe’s aggressive carbon emissions compliance requirements through the implementation of an environmentally advantageous process flowsheet and superior carbon emissions profile for European end markets.”

The company is now focusing on the key aspects of offtake, project finance and permitting in and around a tailored DFS, that will be designed to respond to specific end user product and timing requirements.



This story was developed in collaboration with Infinity Lithium, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.