Grounded Lithium’s Kindersley project could cost $447 million to build, but bring in $350 million per year
By Brian Zinchuk
CALGARY, KINDERSLEY – Grounded Lithium Corp. announced some of the metrics around its proposed Kindersley Lithium Project (KLP) coming from its preliminary economic assessment (PEA). And if those numbers hold, this one, singular lithium project could be seeing revenue to the tune of more than a third of a billion dollars per year. And if successful and prices hold, that could result in payout in less than a year and half once operations commence.
That’d according to a press release from Grounded on July 26. Pipeline Online spoke to the company’s chief financial officer Greg Phaneuf on July 27.
Grounded Lithium now has approximately 300 sections of land in its Kindersley Lithium Project (KLP). Grounded Lithium
Grounded has not yet released its full PEA. It is expected to do so within 45 days of the announcement. But the metrics discussed are based on that PEA.
Phaneuf said the PEA was based on lithium concentrations of 74 milligrams per litre.
He explained that the top line revenue, in Canadian dollars, based on 11,000 tonnes of lithium hydroxide per annum would be around $350 million. That’s based on a lithium price of US$25,000 per tonne, and a 75 cent exchange rate on the dollar. “We’re talking CAD$350 million per annum in revenue,” Phaneuf said.
Current prices of lithium are US$40,000 per tonne. That’s come down quite aways from spike of almost double that over the past year, which is why Grounded, as have other lithium developers, chose a much more conservative price point in their budgeting. But it also means that if prices do remain high, there’s a much higher rate of return.
“We believe we have a very low-cost structure, given the fact that we’re shallow, we don’t have hydrocarbons. We don’t have all these things that would otherwise happen with other projects,” Phaneuf said.
He said a complete cashflow statement would be released with the PEA. But “with EBITDA margins that are fairly healthy, which means a lot of cash is coming to the project, which can be used many ways. It can be used to develop future phases, which is certainly our intention. We don’t want to stop at one phase, we want to build this in a step-wise, Lego block fashion.
“And as we’ve disclosed in our presentation on the website, we see multiple phases. We could see anywhere from three to five separate 10,000 tonnes or 11,000 tons of lithium hydroxide monohydrate or LHM for short off this current land base.”
The molecule is LiOH, from which lithium carbonate or lithium hydroxide can be produced, he explained. Lithium carbonate has historically gone into lithium ion batteries, including most of the current electric vehicles. But they have their challenges, he said, including charging speed and range. “The industry industry is moving towards more solid state batteries, which have quicker recharge longer range, which is what consumers want however costs more at the present time.”
And lithium hydroxide goes more into solid state batteries, he said.
A notable change is the reference to 11,000 tonnes per year production. Up until this point, Grounded Lithium, as well as other lithium explorers in Saskatchewan, have universally referred to 10,000 tonne per year facilities. The 10 per cent difference is a result of the chemistry resulting in more lithium hydroxide than lithium carbonate, he explained, ultimately resulting in more product produced.
“Now based on what we’ve been modeling, with all of our experts, Sproule, etc. we’re referencing lithium hydroxide, which again, based on the chemistry and the conversions of the flow sheet, you end up with more of a higher quality product.
The project calls for $283.5 million in infrastructure, planning, construction and commissioning for the central processing facility, which would be right on Highway 21, near Coleville. Drilling the wellfield, completing those wells and pipelining it all together is expected to cost $104.1 million. With a $59.7 million contingency planned, the total capital cost is budgeted, at this point at $447.3 million.
And the operating costs, by comparison, are pretty minimal compared to the expected revenue. Personnel costs of only $6.3 million per year, electrical power at $13.6 million (especially for the electric submersible pumps on the wells). Maintenance is budgeted at $7.8 million, and product transport at only $2.6 million.
Direct lithium extraction
And perhaps the most revealing number of all was the budget cost of the reagents and consumables needed for the essential process of “direct lithium extraction,” or DLE. Grounded has pegged that at $21.2 million.
Coming to a DLE process that will work, at an affordable price and at commercial scale, is quite literally the billion dollar question for Saskatchewan’s nascent lithium brine industry. If they can make it work, economically, we have a multi-billion dollar industry in the making. If not, it’s a failed exercise.
“The industry is well on our way to solve the problem,” he said with reference to direct lithium extraction. “And the fact that we have partnered with Koch is a pretty good, positive statement in the sense that Koch is helping Standard Lithium with their operation. And Standard Lithium is arguably years ahead of us. They’ve certainly put a lot more money into their pilot. And it’s the same basic technology that we’re planning to use.”
After testing several different processes, in May Grounded announced they had chosen a DLE process, provided by Koch Engineered Solutions (KES). In that announcement, Grounded said they:
“Observed lithium extraction recovery rates from KLP Brine averaged 98% over multiple passes; and
“Equally positive, the process technology effectively rejected other key ions found in KLP Brine deposits with observed rejection factors of 99 per cent.”
The next step is a field pilot lasting several months to determine more extensive extraction results over the long term. Koch will assist in the preparation of a detailed feasibility-level engineering solution using the proprietary Li-Pro technology in a full-scale central processing facility to evaluate overall project commerciality.
Conservative budgeting
Asked if they expected to see the sky-high prices of around US$70,000 per tonne again, Phaneuf replied he didn’t think they would. “Companies on that supply chain are getting smarter, and they’re owning the actual resource to avoid those kinds of spikes, is one part of the question. The other part of the question is that prior to the last few years, most of that product came from other parts of the world. It didn’t come from North America. So we were held captive to some extent by buying those products from Asia.”
He noted with the proliferation of lithium development from brine, clay, and hard rock in North America all seeing to fill that demand, local supply will make a difference.
“If it’s local, you won’t have higher prices, because you don’t have to pay for all that shipping back and forth to process lithium and ultimately, your input cost to make a battery.”
What’s next?
Phaneuf said they have a few different options the board is considering. “Depending on what those plans are, we can go a direction of additional field work – so that could be additional wells, re-entries, etc., to prove more the certainty of our resource base and move the inferred resource number to a portion that would be measured and indicated, which we’ve seen from some of our peers, E3 being one of them, LithiumBank also done that with a property in Alberta. That’s one direction.
“Other direction is to go towards a field pilot, where we construct a right-size plant, where current thinking is about 6 cubes a day which is roughly 36 to 40 barrels per day of brine.”
That pilot would likely be around $5 million, he said. But either plan would be accretive to shareholders, he said.
But part of that cost would be mitigated by one or more government programs that would provide non-dilutive funding. While the provincial government enlarged its oil processing incentives to include lithium from brine, the more significant programs are federal at this point. “Some of the programs that Natural Resources Canada are offering are completely applicable to what we would do with a pilot, and that’s something that we’re definitely considering.”