Lithium Universe (ASX:LU7) releases PFS results

Lithium Universe Limited (ASX:LU7) CEO Alex Hanly discusses the company's prefeasibility study, operational costs and development timeline.

Peter Milios: I'm Peter Milios from the Finance News Network, and today I'm talking with Lithium Universe (ASX:LU7). Lithium Universe, trading under the ASX code "LU7", with a market capitalisation of approximately $10m, is dedicated to closing the lithium conversion gap in North America by developing a mine-to-battery-grade lithium carbonate strategy in Québec, Canada. Joining me today is Lithium Universe CEO, Mr Alex Hanly. Alex, nice to see you again and welcome back to the network.

Alex Hanly: Thanks, Peter. A pleasure to be here.

Peter Milios: First up, Alex, you've just announced the results of the preliminary feasibility study for the Bécancour Lithium Carbonate Refinery in Québec, Canada. What are the key highlights?

Alex Hanly: The team is very excited about what we've just released. The headline numbers speak for themselves, Peter. We've got headline NPV of $780m, a payback of three-and-a-half years and EBITDA of $147m. It's a very strong entry or first numbers to market for the company. And we're happy to illustrate the fact that these are real numbers, numbers that have been produced by proven expertise based on proven experience. So, we're very happy to stand behind these numbers with the team.

Peter Milios: Alex, it's exciting times ahead, but there are a lot of studies in the market so far. What makes this study different, and how confident are you guys in the model that was presented in the study?

Alex Hanly: Confidence levels are extremely high. From the two main elements that go into the PFS, the CapEx, it was developed in lockstep with Hatch. Hatch obviously were there when the Jiangsu Lithium Carbonate Plant was built with Iggy and Jingyuan, and this is the same design that we're implementing in Bécancour. So, the capital cost estimate is very strong. All we've done is really adapt it to today's pricing and integrated that into the Bécancour and Québec environment.

Secondly is operational cost. We've got very strong data from the Jiangsu Lithium Carbonate Plant as we've got the ex-Chief Financial Officer of Galaxy on board with John Sobolewski. So, the operational cost estimate is very strong, the capital cost estimate is very strong, and these are very real numbers.

Peter Milios: Alex, you just mentioned operational costs, but given that China is such a powerhouse, with over 95 per cent of all lithium conversion capacity, how do the Bécancour operational costs stack up?

Alex Hanly: Very key question, Peter. And, from face value, no one can really compete with China from a conversion perspective. The efficiencies are already embedded. They've been operating the conversion side of things for 10 to 15 to 20 years. What we've estimated from our recent trip to China, based on a lot of different discussions, is per unit cost is about $3,250 a tonne. Bécancour are producing… Currently, the operational cost is around $3,970 a tonne.

Now, that's one element, but from a transatlantic perspective, it's a different story. Once you take into account freight from North America, if the spodumene was produced in Canada, for example, all the way to China, and then back into the North American supply chain, you're looking at a very strong or very big freight cost, but then also an imposition of a tariff from the US and the Canadian government. With these elements combined, you're talking about a cost which is 20 per cent higher than the Bécancour operational cost. So, there's a very strong cost-benefit associated with this, Peter.

Peter Milios: Now, Alex, the company uses spodumene price of US$1,170, and a lithium carbonate price of US$20,970. But with price forecast being so important, can you just talk us through these numbers?

Alex Hanly: Yeah, that's right. So, the company's taken a very conservative approach to our numbers used. Obviously, it's a very strong or key element to the financial model that we have, both lithium carbonate from an output and spodumene as an input. Now, what we've done is we've taken a market analysis across companies globally that have used both a spodumene and a lithium carbonate equivalent price within their feasibility studies or bankable technical studies. And these ten reports, we've taken the average of both SC6 and lithium carbonate equivalent to produce an average number in which we've actually taken a 5 per cent discount on for our model. So, we are really trying to display to the market that our number is real and it can also stack up in a low-pricing environment.

Peter Milios: So, Alex, what are the next steps and the timeline from the PFS to that DFS, that definitive feasibility study, and then securing offtake agreements after that?

Alex Hanly: We've come out with a PFS study early because a lot of the discussions we've been having over the last six to nine months is really coming up to a point where we're talking about operational costs, and capital costs, and potential investment. So, this is the reason why we've come with a PFS. As you can see from the feasibility study that we've released, it's a very, very detailed feasibility study. So, it's only going to take us a few months to refine a few things for the DFS coming. And, obviously, in parallel with that, we'll use the prefeasibility study that we have on hand as a bit of a foundation in those discussions with offtake and feedstock suppliers.

Peter Milios: Alex, thank you so much for your time.

Alex Hanly: Thanks, Peter.