Vancouver, Canada
The Converter Engineering Study was conducted by Wave International Pty („Wave“) and
provides an economic evaluation, including capital and operating cost estimates, of the
construction and operation of the Converter. The results of the Converter Engineering Study
are based on a single plant merchant converter designed to produce up to 24,000 tonnes of
high purity battery grade lithium hydroxide monohydrate („LHM“) annually.
As announced on October 18, 2021, the Company has recently completed a pilot test
program that resulted in the successful production of high purity battery grade LHM,
supporting the proposed process plant design of the Converter. As a merchant converter, a
robust flowsheet has been developed to handle a range of spodumene feed sources and, as
such, relevant unit processes are included in the capital and operating cost estimates.
Wave prepared the Converter Engineering Study in accordance with the requirements of a
Class 4 estimate, as defined by the American Association of Cost Engineers’ Cost
Estimation and Classification System.
The results of the Converter Engineering Study support the Company’s ongoing Front End
Engineering Design („FEED“) study of the Converter on a Class 2 estimate basis. The FEED
study is expected to include the following activities:
• continuation of metallurgical testwork;
• finalization of process flowsheet;
• progression of discipline engineering to support improved accuracy of cost estimates;
• major procurement activities including basic engineering design for major supply
packages;
• selection of major contractors and negotiation of material contract terms; and
• progression of approvals.
Key Metrics
Key metrics from the Converter Engineering Study at the assumed base case are presented
below.
Based on the results of the Converter Engineering Study, the Company estimates that the
Converter will generate an average annual EBITDA (see „Non-GAAP Measures“ section below) of approximately U.S.$112 million 1
between 2024 and 2043.
Capital Cost Estimates
The Converter Engineering Study estimates total initial capital costs of approximately €462
million for the implementation of the Converter (determined to a nominal accuracy of +/-
25%), including approximately €223 million in direct capital costs, €77 million in indirect
capital costs, €80 million in owner’s costs and a weighted contingency of 17.9%. The initial
capital cost estimate includes the capital requirements to engineer, procure, construct and
commission the Converter and covers project implementation costs for the period from a
final investment decision to commissioning the Converter. It also includes early procurement
of long lead items and FEED costs. Initial capital cost estimates were generated from
preliminary design, vendor quotations and market data as of a base date of May 14, 2021.
A breakdown of the capital cost estimates from the Converter Engineering Study is
presented in the following table:
Operating Cost Estimates
The average annual operating costs of the Converter are estimated at approximately €164
million per year (determined to a nominal accuracy of +/- 25%).
Prices used to develop operating cost estimates were based on preliminary market enquiries
and analyst reports. Wave identified all activities relating to the procurement of materials,
transportation and processing to produce an ex-works LHM product. A breakdown of the
estimated average annual operating cost over the life of the Converter is presented in the
following table:
Key Assumptions and Sensitivity Analysis
Certain assumptions were relied upon in the Converter Engineering Study, including:
• 20-year life of Converter;
• nameplate annual production of approximately 24,000 tonnes of LMH from
approximately 178,000 tonnes of spodumene concentrate sourced from multiple third
parties through feedstock contracts;
• weighted average price of spodumene concentrate of U.S.$573 per tonne, reducing
from a peak price of U.S.$697 per tonne in 2023 (current spodumene price: U.S.
$2,600). Source: S&P Global Platts, CIF North Asia (as of November 26, 2021);
• weighted average price of LiOH of U.S.$13,276 per tonne, reducing from a peak
price of U.S.$17,695 in 2023 (current LiOH price: U.S.$29,000) 3; and exchange rates as follows: U.S.$/€ = 0.8248; C$/U.S.$ = 0.8042 (current exchange rates: U.S.$/€ = 0.8834; U.S.$/C$ = 0.7817) . Source: S&P Global Platts, CIF North Asia (as of November 26, 2021);
As part of the Converter Engineering Study, a sensitivity analysis was conducted on the
Converter’s pre-tax NPV and IRR to key variables, including spodumene concentrate price
and LiOH price. Using the base case as a reference, the key variables were changed
between +/-30% at 10% intervals while holding other variables constant. Spodumene
concentrate price and LiOH price sensitivities are presented below:
By-Products
The following table provides a breakdown of the non-lithium by-products expected to be
generated from production activities at the Converter:
The results of the Converter Engineering Study are based on an assumed disposal cost for
all such non-lithium by-products of approximately €18 per tonne, except with respect to
sodium sulphate, which is assumed to be cost neutral.
Nevertheless, preliminary testwork undertaken during the Converter Engineering Study has
identified that alumino-silicate by-product, which is expected to be the largest volume nonlithium by-product generated from production activities at the Converter, is suitable for use in
cement manufacturing. Other potential uses for alumino-silicate by-product include
construction and other potential manufactured products such as Zeolites or Kaolinites.
The Company has established a research and development collaboration with GP
Papenburg, to work collaboratively to identify applications and potential offtakes for aluminosilicate by-product. As a risk mitigation, testwork has identified alumino-silicate by-product as
a class D0 waste, which is the lowest classification of waste product in Germany and as
such it can be disposed of in waste management facilities, if required.
Converter Overview
The proposed Converter will be based in Guben, Germany, in a designated and historical
industrial area. As announced by the Company on October 10, 2021, Rock Tech has entered
into an agreement to acquire a twelve-hectare site in the Guben South industrial park.
Closing of the site acquisition is expected to occur in April 2022, subject to the satisfaction of
customary closing conditions, including Rock Tech’s payment of the €1,130,877 purchase
price.
The Guben site was selected after a rigorous site assessment. With access to existing utility
and transportation infrastructure and proximity to potential customers, the Guben South
industrial park is well situated to allow the Company to satisfy growing demand for LHM in
the European electric vehicle manufacturing market. At the proposed Converter site,
approximately 500 metres of rail spur will be required to connect the proposed facility with
the region’s existing rail network. The Converter is expected to benefit from the structural
and logistical advantages associated with long-term access to feedstock through the region’s
well-developed transportation infrastructure and proximity to car manufacturers seeking to
localize their supply chain around European production facilities.
It is expected that Converter will be designed to process spodumene concentrate from
multiple potential sources using the sulphation-causticisation process route to mitigate
technical risk and increase speed to market. This base process chemistry was developed in
the 1950’s, is currently employed almost exclusively in China for the production of lithium
hydroxide from spodumene concentrates, and has also been adopted for three projects
under development in Australia.
The Company has commenced the process of soliciting targeted lender groups, including
international banks, in connection with its evaluation of potential project financing
arrangements in respect of the Converter. Through its corporate advisor Blackbird Partners,
the Company has retained a leading global mineral industry advisory firm to prepare an
independent expert’s report (the „IER“) on the proposed Converter. The results of the IER
will assist potential lenders in their due diligence process, assessing the Converter
Engineering Study and the Company’s ongoing FEED study. It is anticipated that the IER
and the FEED study will be complete in the first half of 2022, with a final investment decision
on the Converter expected to be made by the middle of 2022. Subject to receipt of
necessary regulatory, environmental and internal approvals, construction of the Converter is
expected to begin in mid-to-late 2022, with production commencing in 2024.
“We are pleased bwith the results of the Converter Engineering Study, which support our plans to build the first high-quality merchant battery-grade lithium hydroxide converter in Europe. A FEED study, supporting project financing, is underway and estimated for completion in the first half of 2022. In addition to selecting the site in Guben, we have commenced building our project execution team which is based in the Company’s offices in Ratingen, Germany. This team is responsible for finalizing and implementing the contracting and construction strategy to build and commission the converter commencing by the end of next year.”
Dirk Harbecke
Chief Executive Officer of Rock Tech Lithium
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