Century Lithium plunges after Clayton Valley feasibility

Century Lithium (TSXV: LCE; OTC: CYDVF) issued a feasibility study showing a 17% internal rate of return using a long-term lithium price for its Clayton Valley project in Nevada. The shares dropped. 

The study released on Monday used price assumptions of US$24,000 per tonne for lithium carbonate (Li₂CO₃) and US$600 per tonne for sodium hydroxide (NaOH), a product of Century’s chloride-based leaching process. The spot price of Li₂CO₃ is US$15,100 a tonne compared with US$27,050 per tonne a year ago, according to The Wall St. Journal. 

Shares of Century Lithium closed more than a third lower 46¢ apiece on Monday in Toronto, valuing the company at $68.4 million. They’ve traded in a 52-week range of 36¢ to $1.07. 

Clayton Valley’s after-tax net present value, at an 8% discount rate, is estimated at US$3 billion, according to the study. A proposed 40-year mine could generate an average of 34,000 tonnes per annum (tpa) of battery-quality Li₂CO₃. It may cost about US$3.5 billion to build over three stages. 

The company said it will now direct its focus on engineering and permitting and advance funding discussions to move the project forward. For the past two years it’s been piloting its patent-pending chloride leaching process combined with direct lithium extraction (DLE) for battery metal recovery.

“The study indicates our project has robust economics, made possible with our unique chlor-alkali and DLE processes,” CEO Bill Willoughby said in a release. 

“Our process technology was developed by way of many trials and successes at our pilot plant in Amargosa Valley. As one of the few lithium-focused pilot plants in North America, we continue to operate safely.” 

Recovery rate

A lithium recovery rate of 78% was used in the feasibility study, based on pilot plant data, the company said. Lithium extractions averaged 88% and DLE lithium recoveries were typically above 90%. 

Production is to come from a mineral reserve base totalling 287.7 million tonnes at an average grade of 1,149 parts per million lithium containing 330,000 tonnes of lithium, or about 1.8 million tonnes of lithium carbonate equivalent.

The project is to start with a production capacity of 13,000 tpa during stage one, then ramp up to 28,000 tpa in stage two, and 41,000 tpa in stage three. Stages one and two are to last five years each, while stage three 3 is maintained for 30 years.

Capital cost for the initial stage is estimated at more than US$1.5 billion. The latter two stages are to cost US$650 million and US$1.3 billion, respectively. The project’s cash flow is to pay for the expansions.

Acid shift

In late 2020, the company shifted from using sulfuric acid to extract lithium at Clayton Valley and began to test hydrochloric acid for its improved compatibility with the deposit’s chemistry. The benefits included higher lithium extractions, lower reagent consumption and the ability to use certain DLE technologies.

A key component of the project with chloride-based leaching is a chlor-alkali plant, which provides the ability to produce the key reagents HCl (hydrochloric acid) and NaOH on-site from the electrolysis of a sodium chloride (NaCl) solution.

According to Century, the chlor-alkali plant represents a greater capital investment relative to that of a sulfuric acid plant, but has important environmental and economic benefits for the sustainability of the project.

Additionally, the chlor-alkali plant will generate significant quantities of NaOH surplus to the project’s operational needs and therefore available for sale, helping to offset the lithium operation’s costs.

Correction: An earlier version of this story said the lithium price assumption was nearly a year old. It was instead a long-term price estimate. The Northern Miner regrets the error.