From construction and energy to manufacturing and technology, dozens of industries depend on the supply of commodities that are sourced from deep beneath the Earth’s surface, such as metals and minerals. The mining industry, therefore, is pivotal to the global economy, as it extracts and delivers the raw materials – for example, gold, copper, coal and iron – that are transformed into valuable products and services.
Mining can be a challenging exercise. Projects must be well researched and planned, otherwise they risk vast operational expenses that result in low returns. Preventing this situation from arising requires a thorough evaluation in which key factors of size, grade and quality are assessed to ensure the project is financially viable.
When it comes to mining projects, making informed decisions is the most important part of the process; that cannot be done without adequate data
These three factors are mainstays of any mining project, regardless of the commodity being extracted, and their assessment is classified as a concept-level study. Other factors such as location, access to infrastructure, access to power and corporate social responsibility must also be considered on a more individualised basis. These are known as feasibility studies.
Concept studies must be undertaken to ascertain whether a project is viable according to these three essential factors. Feasibility studies then incorporate additional detail and begin to consider costing. Companies and financial institutions will only decide whether to invest in a project once all preparatory work has been completed.
Neo Lithium’s 3Q Project has recently undergone concept-level studies and provides a useful model for the necessity of these evaluative parameters. The 3Q Project is located in the southern end of the lithium triangle that spans Argentina, Bolivia and Chile. The area is characterised by high-altitude salt flats with a high concentration of lithium. Argentina, together with neighbouring Chile, holds the majority of the world’s lithium brine resources.
Neo Lithium’s 3Q Project in numbers
Tonnes of lithium carbonate equivalent
Net present value
To prepare for the project, Neo Lithium completed a concept-level study and financial appraisal to produce a preliminary economic assessment, an essential document ordered by the Toronto Stock Exchange. In March 2019, the company also completed a pre-feasibility study, allowing it to begin communicating that resources can be economically processed. As such, the site can now be considered a reserve. Armed with this information, the company will continue to assess the project against the key criteria of size, grade and quality.
With regards to size, the 3Q site looks to have resources totalling the equivalent of more than seven million tonnes of lithium carbonate, making it the fifth-largest brine project worldwide. Its substantial size means the project will likely be in production for many years. At pre-feasibility level, it was predicted to have a lifespan of at least 35 years, which, for mining projects, is quite long. Understanding the size of any project is crucial, as it allows companies to use economies of scale. The larger the project, the greater the cost advantages that can be obtained.
In terms of grade, the project is extremely valuable: the higher-grade area of 3Q has the second-best grade of known brines in the world, while the full seven million tonnes have the sixth-highest grade. As the resource has proven to be so rich, the team of geologists and hydrogeologists working on the project has decided to start extraction in the area with the highest concentration of lithium. This makes good economic sense as the higher the grade, the smaller the ponds required to evaporate brine. According to the plan, after 10 years the brine’s grade will drop, at which point the company will need to add more ponds to the extraction process. The same will be required after 20 years, too. All things considered, this is the most cost-effective way to start the project and also emphasises the importance of evaluating a material’s grade at the concept stage.
While both the size and grade evaluations of the project have brought positive results, it’s the quality metric that is particularly advantageous at 3Q. Quality of brine is an important factor in reducing operating costs. The more contaminants present in the brine, the higher the cost of production, as contaminants need to be separated from the product through processing. In the case of lithium brine, sulphates and magnesium are the two most common contaminants.
The brine extracted at 3Q contains the lowest volume of these impurities ever seen in the market, making it a highly valuable product. High-quality brine that contains few contaminants can be treated using solar evaporation ponds, thereby reducing energy consumption during processing and lowering costs. The use of renewable energy has the added bonus of shrinking the company’s carbon footprint. Low-quality materials with many impurities cannot be processed using solar energy, driving up processing costs and increasing the environmental impact. The better the materials’ quality, the lower the initial capital and ongoing operating costs, making the project more attractive for investors. Quality, therefore, is a crucial metric that will fundamentally determine whether a project can progress to the feasibility assessment stage.
Through evaluation of the 3Q site using these three metrics, Neo Lithium established that the project is certainly viable and is likely to be highly lucrative. It benefits from economies of scale, high concentrations of valuable materials and the lowest impurity levels in the industry. These key factors will ensure the site becomes not only a lithium producer, but also a resilient, low-cost producer that can withstand the ups and downs of the market. What’s more, as a result of the low level of impurities and high grade of the site, the initial capital investment will not be very high, making it easier for our team and shareholders to finance the project.
Had the company not undertaken these original concept-level studies, it would be in the dark as to the commercial viability of the site. Instead, it has been able to build on those initial factors with additional studies to further ensure the success of the project. Neo Lithium has now completed pilot ponds, a pilot sulphonation plant, a pilot carbonation plant and permanent camps and offices. To ensure the project reaches its full potential, the company has built roads, helped local communities with a number of initiatives, installed renewable sources of solar energy, completed environmental and social baseline studies, trained local residents, and hired the best professionals in the industry.
None of this progress would have been possible without the initial assessments. While they may seem like simple metrics, they are crucial in evaluating the viability of any mining project. These tests also help producers understand projects from a market perspective, allowing Neo Lithium to position its work to obtain optimal investment. As companies progress from concept-level to feasibility-level studies, they usually appreciate in share value and price. Waiting too long could mean the market ends up valuing the project like a futures-producing asset. Therefore, it’s imperative to promote investment opportunities at the correct moment
in the evaluation process.
When it comes to mining projects, making informed decisions is the most important part of the process; that cannot be done without adequate data. By accruing as much knowledge as possible, companies like Neo Lithium are able to pursue only the most worthwhile projects and ensure long-lasting, significant returns.