US$148 million capex for Quebec lithium project

A prefeasibility study on Canada Lithium‘s (CLQ-V, CLQMF-O) Quebec lithium project looks at an open pit mine that would produce 42.6 million lbs. of battery-grade lithium carbonate per year over a span of 14.8 years but a feasibility study that will come out early next year will look into doubling the mine life.

The project, located northeast of Lacorne Township about 60 km north of Val d’Or, would be equipped to process 2,950 tonnes of ore per day and cost US$148 million to construct with a payback period of 3.1 years.

If everything goes to plan, Canada Lithium estimates it would start construction by the second quarter of 2011 with the process plant commissioning in late 2012.

The project has a pretax net present value of US$325 million (using an 8% discount) and a pretax internal rate of return of 33.6%.

Cash operating costs are estimated at US$2,815 per tonne (or US$1.27 per lb. lithium carbonate) with average annual revenue of US$115 million. Pretax cash flow for the life of the project would be US$872 million.

“The study is a good indication that the Quebec lithium property can compete financially with most of the lithium brine prospects under development, but on a much faster timeline,” said Canada Lithium president and CEO Peter Secker in a statement.

The deposit has measured and indicated resources of 31.6 million tonnes grading 1.11% lithium oxide for a total of 1.9 billion lbs. (867,000 tonnes) of lithium carbonate equivalent.

The project also has inferred resources of 38.9 million tonnes grading 1.12% lithium for 2.3 billion lbs. of lithium carbonate equivalent.

The company says the resource estimate tops both the original historical estimate of 15 million tonnes grading 1.14% lithium and its own conceptual target of 29-30 million tonnes grading 1.1-1.2%.

The resource estimate was based on 506 drill holes. Most were historical, but 39 holes were drilled in 2009 by Canada Lithium.

The resources are comprised of a series of parallel, steeply dipping spodumene-bearing pegmatite dykes.

Mineralization included in the resource estimate covers an area of 1 km long by 550 metres. Recent drilling has hit mineralization as deep as 430 metres.

To advance the project to the feasibility study level the company has started some pilot plant metallurgical studies with SGS Lakefield and will soon begin some engineering studies.

The bulk sample will both fine-tune the metallurgical process as well as produce battery-grade lithium carbonate samples for marketing distribution and testing by potential end users by July 210.

The company has a marketing agreement with Mtisui and Co. of Tokyo, Japan and has also been in discussions with North American lithium buyers based on its demonstrated product quality from bench -scale tests done by SGS Lakefield.

The company will do some extensional and infill resources definition drilling in the summer to better define the location of the spodumene-bearing pegmatites to both the northwest and the southeast on strike with the current resource.

Canada Lithium estimates that the feasibility study, due for completion in early 2011, will cost about $15 million and will be paid for using exiting cash.