Lithium Australia’s $2.8 Billion Dollar Christmas Gift
A maiden resource estimate has been completed on a project jointly owned by Lithium Australia NL (ASX: LIT) (“Lithium Australia”) demonstrating an inferred resource of 25 million tonnes of lithium rich ore. The company has been waiting for a mica-based resource that could provide feedstock for their 100% owned SiLeach® metallurgical process, and the zinnwaldite lithium mica found at the Sadisdorf project is an ideal candidate. In fact, up to 97.4% of the lithium contained in the zinnwaldite was successfully recovered, which means Lithium Australia now has access to a deposit and metallurgical process that could generate 112,500 tonnes of refined lithium, as the ore was measured to have an average of 0.45% Li2O, and at today’s prices, this would fetch over $2,800,000,000.
Furthermore, prices are only expected to grow over the next decade. According to most analysts, demand for lithium will increase significantly in line with the growing market for electric vehicles (EVs) powered by lithium-ion batteries. We have already seen the beginning of this modern day gold rush in mid-2016, when the price of lithium hydroxide increased by almost 300% between October 2015 and June 2016. The lithium carbonate spot price more than tripled over the same period to an average price of $27 per kg in June 2016, from $7.70 per kg in October 2015.
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The project is in the backyard of the most rapidly expanding lithium-dependent markets outside of China, with the majority European vehicle manufacturers announcing their plans to go electric. The synergies are obvious, and Lithium Australia are well placed to take advantage of that expanding market with Sadisdorf. German auto-manufacturers are already gearing up to produce large numbers of EVs, as are many other manufacturers globally. In 2015, for instance, the Chinese government initiated a five-year programme to introduce at least 5 million new EVs onto Chinese roads by 2020.
Sadisdorf is a historic tin mine located in Saxony, Germany, close to the Czech border, and not far from Dresden, Altenberg, Chemnitz and Freiberg. The first recorded mining was in the 16th century, with small scale surface mining being undertaken periodically until the 1900’s. Between 1666 and 1769 it is thought that some 75,000 tonnes of ore was mined, with underground mining beginning during the 20th century. Mining ceased in 1953, however, and the bottom levels of the mine were allowed to fill with water.
Regarding the JV agreement with Tin International AG, a one-time cash payment of €50,000 and 1,723,806 LIT shares were transferred initially. Lithium Australia can earn a 15% interest in the JV by spending €750,000 in exploration on Sadisdorf until 30 June 2018. Alternatively, LIT can elect to pay the outstanding amount in cash to Tin International AG. A further 35% interest (for a total 50% interest) can be earned by spending an additional €1.25 million on exploration until May 2020. After completion of the farm-in period, the two partners will bear the project development costs equally or diluted accordingly.
The SiLeach® process allows for the economical recovery of lithium from micas, a previously forgotten resource owing to this very difficulty. It can be applied to a wide range of lithium feedstock, with low energy consumption, high metal recoveries and extensive by-product credits. Now that the company has a maiden resource estimate, Lithium Australia has never looked more capable of entering the marketplace just in time for the boom. Expect this news to travel quickly and result in some sizeable stock volatility.