Liontown reckons its lithium project could be the next Pilgangoora

Liontown’s flagship lithium project in Western Australia could return $762 million in free cash over nine years, if a scoping study released today works out.

Miners usually undertake four types of studies determine whether a project is economic or not.

These – in order of least to most detailed – are scoping, preliminary feasibility (PFS), definitive feasibility (DFS) and bankable feasibility (BFS).

The 2-million-tonne-a-year Kathleen Valley project in the Eastern Goldfields would cost about $232.2m to build and generate free cash flow of $100 million a year, Liontown (ASX:LTR) says.

This is based on a long-term price of about $900 per tonne for a 5.6 per cent lithium spodumene concentrate.

READ: Lithium stocks — here’s everything you need to know

Spodumene is the main lithium bearing mineral mined from most hard rock lithium mines around the world.

Liontown is looking to upgrade this to a minimum 6 per cent with further test work.

An ongoing 16,000 metre drilling program is aimed at growing the existing resource by an additional 8.5m to 16m tonnes.

Liontown managing director David Richards said the Kathleen Valley study envisioned a similar scale operation – at a similar cost — to those successfully commissioned by Pilbara Minerals and Altura Mining.

“Importantly, using conservative forecast product pricing assumptions, the scoping study estimates competitive life-of-mine cash operating costs of around US$376 ($526) per tonne FOB of spodumene concentrate and potentially $US308 ($430) per tonne net of tantalum credits,” Mr Richards said.

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Liontown wants to move the project forward “as quickly as we can”, with a view to delivering a full DFS by early 2020 before moving into the financing and construction phase.

Discussions with potential strategic off-take partners and consideration of financing alternatives have already commenced, the explorer told investors.

“That will position Kathleen Valley to take advantage of what is widely anticipated to be a rapid expansion of the global lithium-ion supply chain next decade as the electrification of the world’s transport fleet really begins to gather momentum,” Mr Richards said.