Lepidico (LPD) - Investing in Green Lithium & Chemical Plant

Lepidico Ltd. is a lithium exploration and development company, with offices in both Perth and Toronto. The company is listed on the ASX as well as various German stock exchanges. Lepidico Ltd. aims to become a vertically integrated business from mining at its 80% owned Karibib project in Namibia to the production of battery-grade lithium chemicals at its Phase 1 chemical plant in Abu Dhabi. The company implements its L-Max® process technology to extract lithium and various other valuable by-products from lithium-mica and phosphate minerals.

Lepidico Ltd. is in the process of transitioning its Phase 1 lithium chemical project in Abu Dhabi into development and aims to produce lithium and other chemicals by 2024. The project is a low carbon intensity project with all products being essentially green according to the company. The company has also recently entered into a binding offtake agreement with Traxys, a renowned metal trader. The agreement includes Traxys purchasing 100% of Lepidico Ltd.’s lithium hydroxide product for seven years equalling a total of 35,000 tons of LiOH.

Lepidico Ltd. is currently underway with the process of receiving financing through the U.S. international development corporation (DFC). The financing by the DFC is one of the world’s most affordable forms of debt and will also provide institutional trust for additional financing. The DFC appointed Behre Dolbear Australia (BDA) as its independent technical expert, who has recently concluded its technical review. The environmental and social due diligence report, currently in an advanced draft stage, coupled with the successful completion of a 60-day review process will result in DFC funding.

The company plans exploration drilling at its Karibib project in the future as well as the opportunity to diversify its revenue stream through additional agreements.

Recent resource definition and mine plan

On the 23rd of September 2022, Lepidico Ltd. released assay results of its Helikon 4 deposit as well as updates to its Phase 1 Chemical Plant.   The drill results from the company’s resource definition drilling programs include the interception of 34.8 m of 1.25% Li, which has extended the deposits mineralisation to the east along strike as well as down dip. Joe Walsh, the Managing Director of Lepidico Ltd. explains the company’s intent regarding the drilling was to define the mineralisation of the Helikon deposit, with the aim being to upgrade the resources into the indicated category from inferred.

“We've spent most of this year looking at upgrading some of these inferred resources in Namibia, so this is resource definition work, this is not exploration. They're defined, albeit inferred resources, we're upgrading them. We've got some brilliant results, much better grades, much better widths than we envisaged that we would get based on the historical drilling”

The upgrading of the Helikon 4 deposit’s mineralisation is part of the company’s initiatives to extend the operating life of its Phase 1 project. The recent drilling results will be incorporated into an updated mineral resource estimate for the deposit and further define the company’s preliminary mine plan. Walsh explains that the Helikon 4 deposit will be mined early on to enable a better strip ratio.

“That allows us to get a sense for how low cost the mining is going to be here, the grade indicates that we're going to have some of the best in situ material at Helikon 4, which is the name of the deposit. This is going to come into the mine schedule reasonably early on and displace lower-grade, higher strip ratio material. We all know that that has a massive beneficial effect on valuation...”

The company’s announcement further included an update on the development of its Phase 1 chemical plant. The announcement included that the FEED phase analysis of the project will be concluded at the end of November 2022. Walsh explains that due to the chemical plant being a first-of-a-kind, the company is attempting to ensure all due diligence is carried out.  

“The focus is on the chemical plant, and no one's ever built one of these things before. It's purely hydrometallurgical. It's not complex with a pyrometallurgical front end, like a spodumene plant, but it is a proprietary process technology and we've got to get it right. We've spent a lot of time working with not just Lycopodium, with the architects of the process technology, Strategic Metallurgy, based in Perth, and also the independent technical engineer for the lenders to this project, BDA.”

The EPCM contract the company holds with Lycopodium Minerals Pty Ltd. is at an advanced stage according to the company. Lycopodium, in collaboration with Lepidico Ltd., has been able to identify various opportunities to optimise the procurement cycle, with one of the initiatives being to source locally from the UAE, Walsh explains the impact of sourcing locally as not only more cost-effective but also as risk mitigating.

“We've certainly got some targets as to what we think can be the benefits of local sourcing of materials and risk management in this as well. Part of what we're looking at here is, rather than getting materials and equipment out of Europe, where there are all sorts of challenges going on right now, we are locally sourcing as much as possible. Therefore, there will be capital benefits here, vis-a-vis not doing the work. There's certainly risk mitigation. Then the other part of it is that we cannot lose sight of the resource definition work that's being done. In 2-months' time, we will have measured and indicated resources on a number of these areas that are currently inferred. We will be able to have those come into the mine plan.”

Phase 1 lithium project

Lepidico Ltd. is in the process of transitioning its Phase 1 lithium chemical project in Abu Dhabi into development and aims to produce lithium and other chemicals by 2024. The project is a low carbon intensity project with all products being essentially green according to the company. Walsh explains that the company has already started to investigate various greener technologies that it may implement later in the project’s lifetime.  

“In a couple of years' time, the world's largest single-site solar PV 2 GW power station is going to be coming on stream, and the majority of the power from that facility is intended for green hydrogen and green ammonia manufacture within the KIZAD industrial park where we're going to be building. We're looking at future-proofing our plant by putting in a hydrogen-enabled boiler. As soon as we can switch that thing over from natural gas to green hydrogen, our greenhouse gas emissions will probably be 25% lower than a typical vertically integrated spodumene project.”

The company on the 1st of September 2022 announced that it had appointed Roland Wells as the Project Director for the implementation stage of the Phase 1 concentrator and chemical plant. Walsh explains that Wells in collaboration with Hans Daniels, the General Manager of the company’s UAE operations are well experienced to handle the company’s future plans.

“We've now got an executive general manager on the ground in the UAE who has built 2 chemical plants in the same industrial park that we’re building on. All of that expertise is now being embedded into the final stage of completing front-end engineering and design. We’ve also got our own man on the ground in Brisbane who’s based out of Lycopodium’s office, we didn’t have that until 6-8 weeks ago. During Covid, it was very difficult to be recruiting people and getting them to be working in locations like that, so I think that there are some legacy issues here.”

The company will continue with advancing the Phase 1 Chemical Plant with Walsh explaining that the detailed design of the plant will focus on further engineering development with the majority of the plant’s design being finalised.

“The design has already been locked down. The design was locked down back in June. What we're going to be doing here is more detailed stuff. There will be some work looking at repositioning this tank to reduce that piping run, there's some more detailed engineering that's being pulled into this phase. That's the smaller stuff in the greater scheme of things.”

Financing and offtake agreements

Lepidico Ltd. is currently underway with the process of receiving financing through the U.S. international development corporation (DFC). The financing by the DFC is one of the most affordable forms of debt in the world and will also provide institutional trust for additional financing. The DFC appointed Behre Dolbear Australia (BDA) as its independent technical expert, who has recently concluded its technical review. The environmental and social due diligence report, currently in an advanced draft stage, coupled with the successful completion of a 60-day review process will result in DFC funding.

Lepidico Ltd. has also recently entered into a binding offtake agreement with Traxys, a renowned metal trader. The agreement includes Traxys purchasing 100% of Lepidico Ltd.’s lithium hydroxide product for seven years equalling a total of 35,000 tons of LiOH. The company may also have a royalty income in the future, with it already having licenced its L-Max® process technology.

“Phase one is all about proof of commercialization, managing risk and demonstrating the commercial viability of these process technologies. In 10 years’ time, we will have looked at a phase 2 project or even phase 3. We've already sold one licence package to Cornish Lithium, so by then, we should be looking at royalties on the horizon. In certain circumstances, we could consider other licensing arrangements as well. That's a whole other part of the business here, and what we have seen over the course of this year is much greater interest in lithium miners, it’s not just lepidolite, there are other lithium mica minerals like zinnwaldite, polylithionite, lithium muscovite. Our process can contribute to all of those. “

Future

Lepidico Ltd. plans to update the economics of the Phase 1 chemical plant in the future, with the company believing that even though inflation may have affected the economics of the plant, the forecast price of lithium will be able to mitigate any cost pressures.

“Along with the front-end engineering and design is the control estimate, which gives us the CapEx for the project and the control schedule, which tells us the time it's going to take to build the project. I think, as everyone knows, vis-a-vis a definitive feasibility study that was done in May 2020, there are inflationary pressures that we've experienced, but if you look at BMI's forecast for the lithium price, that's increased significantly as well.”

 Lepidico Ltd. believes that through its initiatives, both mineral as well as processing wise, it will be able to position itself to be a vertically integrated lithium company in the future from mining at its 80% owned Karibib project in Namibia to the production of battery-grade lithium chemicals at its Phase 1 chemical plant in Abu Dhabi.

“When there was a lack of concentrate capacity and a reasonable amount of converter capacity, we saw very strong spodumene concentrate pricing. As more concentrate operations come on, and the barrier to entry to produce a mine and a DMS plant is a lot lower than to build a large, complex, downstream chemical plant, particularly if it's spodumene with a large roaster and calciner associated with it. Once there's an oversupply of spodumene concentrates - supply-demand - concentrate prices decline but you can still have prevailing chemical prices elevated because there isn't enough converter capacity to satisfy actual chemical demand.”

‍To find out more, go to the Lepidico website