Lithium Americas feasibility boosts production capacity at Caucharí-Olaroz

Lithium Americas (TSX: LAC; NYSE: LAC) has released an updated feasibility study that boosted the production capacity of Caucharí-Olaroz lithium project in Argentina’s Jujuy province to 40,000 tonnes per annum from 25,000 tonnes per annum.

Lithium Americas and Ganfeng Lithium (TSXV: ILC; US-OTC: ILHMF) each own 50% of the project.

The feasibility study, which updates the one tabled in 2017, says the project’s mineral reserves support the annual production of more than 40,000 tonnes per year of battery-quality lithium carbonate (Li₂CO₃) for 40 years.

The project has 6.3 billion measured and indicated cubic metres of brine grading 592 milligrams per litre lithium for 19.8 million tonnes lithium carbonate equivalent. Inferred resources stand at 1.5 billion inferred cubic metres of brine grading 592 milligrams per litre lithium for 4.7 million tonnes lithium carbonate equivalent.

Construction of the project, which is currently underway, is expected to be completed by the end of next year. Lithium Americas’ 50% share of all additional funding required up to the start of production, including working capital, is expected to be fully-funded with $221 million in available credit and loan facilities.

Pausing for a photo at the Cauchari salt lake at Lithium Americas’ Cauchari-Olaroz lithium brine project in northwestern Argentina’s Jujuy province. Credit: Lithium Americas.

The feasibility study targets first production by early 2021. A production ramp-up schedule of 15,250 tonnes and 36,000 tonnes is assumed in 2021 and 2022, respectively. Caucharí-Olaroz is expected to achieve a production rate of 40,000 tonnes per year of Li₂CO₃ before the end of 2022, with production of 40,000 tonnes per year from 2023 to 2060.

Other highlights of the updated feasibility study include construction capital costs of US$565 million, an after-tax net present value of US$1.33 billion at a 10% discount rate, and an average earnings before interest, tax, depreciation and amortization of US$307 million.

Operating costs in the updated feasibility study went up from US$2,495 per tonne Li₂CO₃ to US$3,576 per tonne Li₂CO₃, primarily driven by a near doubling of reagent costs following process changes to achieve improved battery-grade specifications. Initial capex has jumped from US$425 million to US$565 million.

Analyst Joel Jackson with BMO Capital Markets has lowered its target price for Lithium Americas to $5 per share from $6 per share, following the release of the updated feasibility study. Jackson also cites the delay in initial production from the first half of next year to early 2021 and the US$140-million increase in initial capex as reasons for lowering the company’s target price.

At press time, Lithium America’s shares were trading at $4.07 with a 52-week trading range of $3.74 to $6.43. The company has 89 million common shares outstanding for a $363-million market capitalization.

The updated feasibility study includes a conventional, commercially-proven brine processing technology to produce battery-quality Li₂CO₃ that can be used to meet the specifications of battery material producers in manufacturing cathode and electrolyte for lithium-ion batteries.

Construction of the evaporation ponds, which started in the first quarter of 2018, is 60% completed. Brine from production wells started filling ponds in the fourth quarter of last year, and the liming purification process at the ponds is expected to commence in the second quarter of next year.