Allkem Limited (ASX|TSX: AKE) (“
Allkem” or
“
the Company”) is pleased to
announce a project update to its wholly owned Cauchari lithium
brine project located in Jujuy Province in Argentina. Allkem has
reviewed and updated the project Mineral Resources and Ore
Reserves, project cost and schedule estimates, and project
economics from the October 2019 Technical Report (
“previous
study”) released before Orocobre Limited acquired 100% of
Advantage Lithium Corporation in April 2020.
HIGHLIGHTS
Financial Metrics
- 25,000 tonnes per annum of lithium
carbonate production capacity
- Material ~200% increase in Pre-tax
Net Present Value (“NPV”) to US$2.52 billion from
US$0.84 billion in the previous study at a 10% discount rate. The
Post-tax NPV at 10% discount rate is US$1.37 billion.
- Cash operating margin stayed
constant at ~85%, with the increased realised price projections
being proportionally offset by increased operating costs. Operating
costs increased from US$3,560 per tonne LCE to US$4,081 per tonne
lithium carbonate equivalent (“LCE”) due to
material increases in the price of soda ash, lime, natural gas and
employment costs since the previous study
Mineral Resource and Ore
Reserve
- Total Mineral Resource Estimate of
5.95 million tonnes (“Mt”) LCE, a 6% decrease from
the previous estimate in 2019 due to slight changes in mining
parameters
- Total Ore Reserve Estimate of 1.13
Mt LCE supporting a 30-year project life based on Ore Reserves
only, a 11% increase from the previous statement due to a revised
point of reference for Ore Reserve reporting of ‘brine pumped to
the evaporation ponds’
Project Cost and Schedule
Update
- Increase in the development capital
cost estimate (“CAPEX”) from US$446 million in the
previous study to US$659 million, for mechanical completion,
representing a 48% increase
- Substantial mechanical completion,
pre-commissioning and commissioning activities are expected by H1
CY27 with first production expected in H2 CY27 and ramp up expected
to take 1 year
Managing Director and Chief Executive
Officer, Martin Perez de Solay commented“The updated study
results clearly demonstrate the value of the Cauchari Project on a
stand-alone basis. With the study update being based on the
historic work performed by Advantage Lithium Corporation we do see
substantial opportunities to integrate this asset into our Olaroz
complex. These opportunities would likely reduce capital and
operating costs and these are being explored as part of our Olaroz
Stage 3 expansion studies.”
PROJECT BACKGROUND
Allkem is developing the Cauchari Project
(“the project”) on the Cauchari Salar which is
located in the Puna region, 230 kilometres west of the city of San
Salvador de Jujuy in Jujuy Province of northern Argentina at an
altitude of 3,900 metres (m) above sea level. The property is to
the south of Olaroz near a paved Hwy that connects to the
international border with Chile (80 km to the west) and the major
mining centre of Calama and the ports of Antofagasta and Mejillones
in northern Chile, both major ports for the export of mineral
commodities and import of mining equipment. The Cauchari deposit
lies within the “lithium triangle”, an area encompassing Chile,
Bolivia and Argentina that contains a significant portion of the
world’s estimated lithium resources (Figure 1).
Figure 1: Cauchari project
locationhttps://www.globenewswire.com/NewsRoom/AttachmentNg/75f6a06e-d24a-4bff-a46b-a53136318557
The Cauchari tenements cover 28,906 ha and
consist of 22 minas which were initially applied for on behalf of
South American Salars (“SAS”). SAS is a joint
venture company with the beneficial owners being Advantage Lithium
(“AAL”) with a 75% interest and La Frontera with a
25% stake. La Frontera and AAL are 100% owned by Allkem Limited.
The Project is not known to be subject to any environmental
liabilities.
The Project is a planned lithium brine mining
and processing facility that will produce lithium carbonate. Allkem
has reviewed and updated the project Mineral Resources and Ore
Reserves, project cost and schedule estimates, and project
economics from the previous technical report dated October 2019
released before Orocobre Limited acquired 100% of Advantage Lithium
Corporation in April 2020. This project update of the Cauchari
Mineral Resource and Ore Reserves indicate potential for a 25,000
tonne per annum (“tpa”) lithium carbonate
processing facility with a life expectancy of 30 years.
The wellfield, brine distribution, evaporation
ponds, waste (wells and ponds) and process plant cost estimates are
Association for the Advancement of Cost Engineering
(“AACE”) AACE Class 4 +30% / - 20% with no
escalation of costs. Lithium production has not commenced at the
Cauchari site, however an update to the pre-feasibility study
(“PFS”) has been completed for Cauchari.
GEOLOGY &
MINERALISATION
Salar de Cauchari is a mixed style salar, with a
halite nucleus in the centre of the Salar overlain with up to 50 m
of fine grained (clay) sediments. The halite core is interbedded
with clayey to silty and sandy layers. The Salar is surrounded by
relative coarse grained alluvial and fluvial sediments. These fans
demark the perimeter of the actual Salar visible in satellite
images and at depth extend towards the centre of the Salar where
they form the distal facies with an increase in sand and silt. At
depth (between 300 m and 600 m) a deep sand unit has been
intercepted in several core holes in the SE Sector of the Project
area.
The brines from Salar de Cauchari are solutions
nearly saturated in sodium chloride with an average concentration
of total dissolved solids (“TDS”) of 290 g/l. The
average density is 1.19 g/cm3. Components present in the Cauchari
brine are potassium, lithium, magnesium, calcium, chloride,
sulphate, bicarbonate and boron.
MINERAL RESOURCE AND ORE RESERVE
ESTIMATES
Brine Mineral Resource
Estimate
Atacama Water was engaged to estimate the
lithium Mineral Resources and Ore Reserves in brine for various
areas within the Salar de Cauchari basin in accordance with the
2012 edition of the JORC code (“JORC 2012”).
Although the JORC 2012 standards do not address lithium brines
specifically in the guidance documents, Atacama Water followed the
NI 43-101 guidelines for lithium brines set forth by the Canadian
Institute of Mining, Metallurgy and Petroleum (CIM 2014) which
Atacama Water considers complies with the intent of the JORC 2012
guidelines with respect to providing reliable and accurate
information for the lithium brine deposit in the Salar de
Cauchari.
A lithium cut-off grade of 300 mg/L was utilised
based on a projected lithium carbonate price of US$20,000 per tonne
over the entirety of the LOM. The total revised Mineral Resource
estimate of 5.95 Mt LCE (detailed in Table 1) reflects a 5.6% total
decrease to the prior Mineral Resource of 6.30 Mt LCE (Table 2).
This decrease relates to the use of a cut-off grade in the
estimation of mineral resources.
The different Mineral Resource categories were
assigned based on available data and confidence in the
interpolation and extrapolation possible given reasonable
assumptions of both geologic and hydrogeologic conditions.
Measured, Indicated and Inferred Mineral Resource; totalling 160.9
km2, are displayed in Figure 2.
Figure 2: Location section of Measured,
Indicated and Inferred Lithium Mineral Resources
https://www.globenewswire.com/NewsRoom/AttachmentNg/9141126e-a63f-415a-82dc-885cdd879155
Table 1: Cauchari Mineral Resource
Estimate at August 2023
Category |
Brine volume |
Average Li |
In Situ Li |
Li2CO3
Equivalent |
Li2CO3
Variance to 2019 |
|
m3 |
mg/l |
tonnes |
Tonnes |
% |
Measured |
6.5 x 108 |
527 |
345,000 |
1,850,000 |
0% |
Indicated |
1.1 x 109 |
452 |
490,000 |
2,600,000 |
-12% |
Measured & Indicated |
1.8 x 109 |
476 |
835,000 |
4,450,000 |
-7% |
Inferred |
6.0 x 108 |
473 |
285,000 |
1,500,000 |
0% |
Total |
2.4 x 109 |
475 |
1,120,000 |
5,950,000 |
-6% |
- The Competent
Person(s) for these Mineral Resources and Ore Reserves estimate is
Atacama Water
- Comparison of
values may not add up due to rounding or the use of averaging
methods
- Lithium is
converted to lithium carbonate (Li2CO3) with a conversion factor of
5.323
- The cut-off
grade used to report Cauchari Mineral Resources is 300 mg/l
- Mineral
Resources that are not Ore Reserves do not have demonstrated
economic viability, there is no certainty that any or all of the
Mineral Resources can be converted into Ore Reserves after
application of the modifying factors
|
Table 2: Cauchari Mineral Resource
Estimate at April 2019
Category |
Brine volume |
Average Li |
In Situ Li |
Li2CO3
Equivalent |
|
m3 |
mg/l |
tonnes |
Tonnes |
Measured |
6.5 x 108 |
527 |
345,000 |
1,850,000 |
Indicated |
1.2 x 109 |
452 |
550,000 |
2,950,000 |
Measured & Indicated |
1.9 x 109 |
476 |
900,000 |
4,800,000 |
Inferred |
6.0 x 108 |
473 |
280,000 |
1,500,000 |
Total |
2.5 x 109 |
475 |
1,180,000 |
6,300,000 |
Note: The reader is cautioned that Mineral Resources are not Ore
Reserves and do not have demonstrated economic viability.
Values are inclusive of Ore Reserve estimates, and not “in addition
to” |
Additional information for the resource
estimation can be found in the Annexures.
Brine Ore Reserve Estimate
Proved Reserves were derived from the Measured
Resources in the NW wellfield area during the first seven years of
production (with production in the NW extending for 9 years).
Lithium Ore Reserves derived after Year 7 from the Measured and
Indicated Mineral Resources in the NW and SE wellfield areas were
categorized as Probable Reserves. Results of a separate model
simulation to evaluate the potential effect of the proposed
neighbouring LAC brine production (according to LAC Updated
Feasibility Study of January 2020) showed that there is no material
impact on the Cauchari Reserve Estimate. Table 3 shows the Ore
Reserve Estimate for the Cauchari Project.
It is the opinion of the CP that the FEFLOW
model provides a reasonable representation of the hydrogeological
setting of the Project area and that the model is adequately
calibrated to be an appropriate tool to estimate the Proved and
Probable Reserves reported hereinafter. To the extent known by the
CP, there are no known environmental, permitting, legal, title,
taxation, socioeconomic, marketing, political or other relevant
factors that could affect the Ore Reserve estimate which are not
discussed in this Report.
The revised Ore Reserve Estimate of 1.13 Mt LCE
supporting a 30-year project life based on Ore Reserves only, an
11% increase from the previous statement due to a revised point of
reference for Ore Reserve reporting of ‘brine pumped to the
evaporation ponds.’ Process efficiency factors were considered in
the previous estimate, while the current reserve is reported from a
point of reference of brine pumped to the evaporation ponds.
Table 3: Cauchari Project Reserve
Estimate at 30 June 2023
Category |
Year |
Brine Vol
(Mm3) |
Average Lithium Grade (mg/L) |
Lithium (kt) |
Li2CO3
Equivalent (kt) |
Proved |
1-7 |
76 |
571 |
43 |
231 |
Probable |
8-30 |
347 |
485 |
169 |
897 |
Total |
1-30 |
423 |
501 |
212 |
1,128 |
- The Competent Person(s) for these
Mineral Resources and Ore Reserves estimate is Atacama Water.
- Comparison of values may not add up
due to rounding or the use of averaging methods.
- Lithium is converted to lithium
carbonate (Li2CO3) with a conversion factor of 5.323.
- The cut-off grade used to report
Cauchari Ore Reserves is 300 mg/l.
- Mineral Resources that are not Ore
Reserves do not have demonstrated economic viability, there is no
certainty that any or all of the Mineral Resources can be converted
into Ore Reserves after application of the modifying factors.
- The Lithium Ore Reserve Estimate
represents the lithium contained in the brine produced by the
wellfields as input to the evaporation ponds. Brine production
initiates in Year 1 from wells located in the NW Sector. In Year 9,
brine production switches across to the SE Sector of the
Project.
- Approximately 25% of M+I Mineral
Resources are converted to Total Ore Reserves.
- Potential environmental effects of
pumping have not been comprehensively analysed at the PFS stage.
Additional evaluation of potential environmental effects will be
done as part of the next stage of evaluation.
- Additional hydrogeological test
work will be required in the next stage of evaluation to adequately
verify the quantification of hydraulic parameters in the Archibarca
fan area and in the Lower Sand unit as indicated by the sensitivity
analysis carried out on the model results. Ore Reserves are derived
from and included within the M&I Mineral Resources in the
Mineral Resource Table 1 above.
Indicated Mineral Resources of 894,000t LCE
contained in the West Fan Unit are not included in this PFS
production profile. There is a reasonable prospect that through
additional hydrogeological test work Inferred Resources in the
Lower Sand Units will be converted to M+I Mineral Resources.
BRINE EXTRACTION AND
PROCESSING
Brine Extraction
Lithium bearing brine hosted in pore spaces
within sediments in the salar will be extracted by pumping using a
series of production wells to pump brine to evaporation ponds for
its concentration. Extraction of brine does not require open pit or
underground mining.
Based on the results of the pumping tests
carried out for the Project, the brine extraction from Salar de
Cauchari will take place by installing and operating two
conventional production wellfields. The brine production will take
place initially from a wellfield in the NW Sector immediately
adjacent to the evaporation ponds on the Archibarca Fan from Year 1
through to Year 9. After Year 9 it is planned that the brine
production will shift to a second wellfield constructed in the SE
Sector (Figure 3).
Figure 3: Location map of NW and SE
wellfieldhttps://www.globenewswire.com/NewsRoom/AttachmentNg/0842b0b5-62ae-4c3a-a8f8-bdb3040aedce
The combined production from the NW wellfield
will ramp up from 170 l/s in Year 1 to approximately 460 l/s in
Year 8. It is expected that pumping rates of individual wells in
the NW wellfield will vary between 20 l/s and 30 l/s so that up to
22 wells may be required to meet the overall brine production
requirements. The NW production wells are located on the main
access roads between the evaporation ponds and will be drilled and
completed to a depth of approximately 360 m in the lower brine
aquifer of the Archibarca fan. The upper part of the production
wells through the Archibarca fresh to brackish water aquifer will
be entirely cemented and sealed to an approximate depth of 140 m to
avoid any freshwater inflow into the wells. Below 140 m depth the
wells will be completed with 12-inch diameter production casing.
The wells will be equipped with submersible pumping equipment. It
is planned that the NW production wells will discharge immediately
into evaporation ponds No 1 and No 2 without intermediate boosting
or storage requirements.
As a general overview of the process, the brine
that feeds the lithium carbonate (Li2CO3) Plant is obtained from
the two brine production wellfields.
The brine is pumped to the evaporation ponds,
designed to crystallize mainly halite and some glauber salt,
glaserite, silvite and borate salts. At certain points slaked lime
is added to the brine, which removes a large part of the Magnesium
(Mg) as magnesium hydroxide. The Calcium (Ca) is precipitated as
gypsum, thus also removing dissolved sulphate (SO4). After the
evaporation ponds, the brine is fed to the Li2CO3 plant, where,
through a series of purification processes, solid lithium carbonate
is obtained, to be shipped according to the final customer
requirements. A general process flow diagram is shown in Figure
4.
Figure 4: Process Overview
Diagramhttps://www.globenewswire.com/NewsRoom/AttachmentNg/5b58d7ac-8e71-45c1-990b-fbda65e579ca
The brine is concentrated until it reaches a Li
concentration of 7,000 mg/l. An overall evaporation ponds and
lithium carbonate plant recovery of 66% for lithium is modelled
based on industrial operational results. A more detailed
description of the process for both the evaporation ponds and the
lithium carbonate plant are presented below.
The Cauchari Project will include the design and
installation of production wells, evaporation ponds and a
processing plant to obtain 25,000 tpa of battery grade lithium
carbonate (Li2CO3). A general block diagram of the process is shown
in Figure 5.
Figure 5: General Block Diagram for the
Processhttps://www.globenewswire.com/NewsRoom/AttachmentNg/425fad04-0d97-45f7-97d6-9ace3e28d521
The lithium carbonate plant is a chemical
facility that receives the concentrated brine from the evaporation
ponds and, through a series of chemical processes, generates
lithium carbonate battery grade in a solid form. All impurities
that are still left in the brine after the evaporation ponds are
removed in the lithium carbonate plant, through specific stages
described below.
The first stage of the lithium carbonate plant
is the calcium and magnesium removal stage. A solution of soda ash
and slaked lime are added to the concentrated brine from the
evaporation ponds in an agitated reactor. Mg and Ca will
precipitate as magnesium hydroxide (Mg(OH)2) and calcium carbonate
(CaCO3). The slurry is then filtered, and the Mg and Ca free brine
is sent to the next stage. The solids obtained from the filtering
stage are re-pulped and sent directly to the first sludge pond.
The lithium rich brine is fed to an ion exchange
stage, to remove remaining calcium, magnesium, and any other di/tri
valent metals in the brine. The impurity free brine is then sent to
carbonation reactors. Here the addition of a soda ash solution and
high temperatures result in lithium carbonate precipitating
(technical grade), which is filtered on a belt filter, repulped and
centrifuged. This can be directly dried and sold as technical
grade. In order to obtain battery grade, the pulp is transported to
another purification stage. The mother liquor generated from the
belt filter is recycled to the ponds in order to recover the
remaining lithium.
The purification stage consists of the
generation of lithium bicarbonate through the reaction in agitated
reactors of the solid lithium carbonate and gaseous CO2 at low
temperature. The lithium bicarbonate is much more soluble in water
than lithium carbonate, allowing the separation from any residual
soluble and insoluble impurities. With the use of an IX stage
utilizing a specific selective resin, any boron and/or di/tri
valent metals left in the solution are removed, and a highly pure
bicarbonate solution is fed to a desorption stage. With the
increase of temperature (up to 80°C) the CO2 is desorbed, and solid
lithium carbonate is re-precipitated. The slurry is centrifuged,
dried, reduced in size (milled) and packaged in maxibags, to be
finally transported to clients.
SITE LAYOUT &
INFRASTRUCTURE
Physical areas included on the Project are shown
in Figure 6 and Figure 7:
- NW and SE evaporation ponds and Liming Plant
- NW brine wellfield (Archibarca location)
- SW brine wellfield
- Alluvial production wells are located southeast of the Project
area
- Liming plant ponds (decantation ponds)
- Industrial facilities area
- Harvested salt stockpile areas
The brine production wellfields will be located
on two sectors of the Salar de Cauchari, one in the Archibarca
area, near and among the initial evaporation ponds and another
located south-east of this location. Initially, and up to year four
(4) of the operation, the evaporation ponds will cover an area of
approximately 10.5 million m2. The brine lithium concentration
decreases from 580 mg/l to 545 mg/l by Year 5 of the operation, and
an increase to 11.3 million m2 in pond area is required. By Year
10, the average brine lithium concentration decreases to 491 mg/l
and requires the final increase of the evaporation ponds area to
12.2 million m2.
Figure 6: Main physical areas and roads
of the
Projecthttps://www.globenewswire.com/NewsRoom/AttachmentNg/7bb92b14-e9f5-46e9-963a-f991078bd9fd
Temporary and permanent facilities are
contemplated in the Project for the industrial area. The industrial
facilities area for the Project will be located in the NW Sector of
the Project on the Archibarca fan, and will include:
- Lithium
carbonate plant
- Auxiliary
services:
- Reagent
storage
- Plant supply
storage (gas, CO2, compressed air, fuel)
- Water Treatment
Plant
- Access control
area
- Electrical rooms
(Electrical generators)
- Boiler room
- Warehouses
- Truck
workshop
- Administrative
building and laboratory
- Workers’
camp
- Temporary
contractors’ installations
Figure 7: Detail of main installations
for the
Projecthttps://www.globenewswire.com/NewsRoom/AttachmentNg/0655c5a5-483e-475d-bf97-84d93b333dcb
FINANCIAL PERFORMANCE
Development Capital and Operating
Costs
Project CAPEX for 25,000 tpa lithium carbonate
is estimated to be US$659 million. Further details are summarised
in Table 4.
Costs estimates and economic assessments for the
25,000 tpa processing facility are at a AACE Class 4 +30% / - 20%
level with no escalation of costs.
The Cauchari Project is at Pre-Feasibility Study
phase.
The capital cost estimate was prepared by Worley
Chile S.A. and Worley Argentina S.A. (collectively, Worley) in
collaboration with Allkem. The estimate includes capital cost
estimation data developed and provided by Worley, Allkem, and
current estimates.
The capital cost was broken into direct and
indirect costs.
Table 4: Summary of Development Capital
Cost
Development Capital Cost |
Units |
Total |
Direct Cost |
|
|
Brine Extraction Wells |
US$M |
16 |
Evaporation Ponds |
US$M |
146 |
Brine Treatment Plant |
US$M |
18 |
Lithium Carbonate Plant |
US$M |
105 |
General Services |
US$M |
110 |
Infrastructure |
US$M |
40 |
Additional Camps |
US$M |
15 |
Total Direct CAPEX |
US$M |
450 |
EPCM + Owners Cost + Others + Contingency |
US$M |
209 |
TOTAL CAPEX |
US$M |
659 |
|
|
|
Operating cost is estimated to be US$4,081 per
tonne LCE. No inflation or escalation provisions were included.
Subject to the exceptions and exclusions set forth in this Report,
the aggregate annual Operating Cost for Cauchari is summarised in
Table 5. Reagents represent the largest operating cost category,
then labour followed by operations and maintenance.
Table 5: Summary of Operating
Cost
Operating Cost |
Units |
Total |
Reagents |
US$/t LCE |
2,158 |
Labour |
US$/t LCE |
674 |
Energy |
US$/t LCE |
235 |
General and Administration |
US$/t LCE |
596 |
Consumables and Materials |
US$/t LCE |
243 |
Transport and Port |
US$/t LCE |
175 |
TOTAL OPERATING COST |
US$/ t LCE |
4,081 |
Minor discrepancies may occur due to rounding |
|
|
Lithium carbonate price
forecast
Lithium has diverse applications including
ceramic glazes, enamels, lubricating greases, and as a catalyst.
Demand in traditional sectors grew by approximately 4% CAGR from
2020 to 2022. Dominating lithium usage is in rechargeable
batteries, which accounted for 80% in 2022, with 58% attributed to
automotive applications. Industry consultant, Wood Mackenzie
(“Woodmac") estimates growth in the lithium market
of 11% CAGR between 2023-2033 for total lithium demand, 13% for
automotive, and 7% for other applications.
Historical underinvestment and strong EV demand
have created a supply deficit, influencing prices and investment in
additional supply. Market balance remains uncertain due to project
delays and cost overruns. The market is forecast to be in deficit
in 2024, have a fragile surplus in 2025, and a sustained deficit
from 2033.
Prices have fluctuated in 2022-2023, with
factors like plateauing EV sales, Chinese production slowdown, and
supply chain destocking influencing trends. Woodmac notes that
battery grade carbonate prices are linked to demand growth for LFP
cathode batteries and are expected to decline but rebound by 2031.
Lithium Hydroxide’s growth supports a strong demand outlook, with
long-term prices between US$25,000 and US$35,000 per ton (real US$
2023 terms).
PROJECT ECONOMICS
An economic analysis was developed using the
discounted cash flow method and was based on the data and
assumptions for capital and operating costs detailed in this report
for brine extraction, processing and associated infrastructure. The
evaluation was undertaken on a 100% equity basis.
The basis of forecast lithium carbonate pricing
was provided by Woodmac for the period 2023 to 2035, with a
longer-term price of US$28,000/t and US$26,000/t used for battery
grade and technical grade lithium carbonate from 2035 onwards.
The current Jujuy Provincial Mining royalty is
limited to 3% of the mine head value of the extracted ore,
calculated as the sales price less direct cash costs related to
exploitation and excluding fixed asset depreciation.
The key assumptions and results of the economic evaluation are
displayed in Tables 6 below.
Table 6: Key assumptions utilised in the
project economics
Assumption |
Units |
Stage 1 |
Project Life Estimate |
Years |
30 |
Discount Rate (real) |
% |
10 |
Provincial Royalties 1,2 |
% of LOM net revenue |
3.0 |
Corporate Tax2 |
% |
35 |
Annual Production3 |
tonnes LCE |
25,000 |
CAPEX |
US$M |
659 |
Operating Cost |
US$/tonne LCE |
4,081 |
Average Selling Price4 |
FOB US$/tonne LCE |
27,066 |
1 Provincial royalty agreement at 3.0%, export duties,
incentives and other taxes are not shown. 2 There is a risk that
the Argentina Government may, from time to time, adjust corporate
tax rates, export duties and incentives that could impact the
Project economics.3 Based on 100% battery grade lithium carbonate
production.4 Based on price forecast provided from Wood Mackenzie
and targeted production grades stated in Footnote 3 above.
The study update demonstrates strong financial
outcomes with a pre-tax NPV at a 10% discount rate of US$2.52
billion, this represents a ~200% increase from US$0.84 billion in
the previous study.
Further project economics are summarised in Table 7.
Table 7: Summary of financials over a
30-year project life
Financial Summary |
Units |
Total |
NPV @ 10% (Pre-tax) |
US$M |
2,523 |
NPV @ 10% (Post-tax) |
US$M |
1,366 |
IRR (Pre-tax) |
% |
32.6 |
IRR (Post-tax) |
% |
23.9 |
Payback Period1 |
Years |
3.3 |
Development Capital Intensity |
US$ / tpa LC |
26,376 |
1 Payback period is from date of first commercial production
Sensitivity Analysis
As displayed in Table 7 above, the Cauchari
pre-feasibility study update demonstrates strong financial outcomes
with a post-tax NPV at 10% discount rate of US$1,366 million and
post-tax IRR of 23.9%. Figure 8 analyses the impact on post-tax NPV
when pricing, operating cash costs and development CAPEX fluctuate
between +/- 25 %.
Figure 8: NPV Sensitivity
Analysishttps://www.globenewswire.com/NewsRoom/AttachmentNg/db3dae9b-c28b-4226-aa73-d0842df5301b
FundingFunding is expected to
be provided through one or more of the following:
- existing corporate cash;
- existing or new corporate debt or project finance
facilities;
- Cashflow from operations
ENVIRONMENTAL AND SOCIAL
IMPACTS
Environmental Liabilities
The Project tenements are not subject to any
known environmental liabilities. There have been historical ulexite
/ borax mining activities adjacent to the Project in the north of
the Salar. These mining operations are generally limited to within
three metres of the surface, and it is assumed that these borax
workings will naturally be reclaimed when mining is halted due to
wet season inflows.
Base line studies
The Project has successfully completed various
environmental studies required to support its exploration programs
between 2011 and the present. The last Environmental Impact
Assessment approval was in 2017 for the exploration stage.
In September 2019 the Project submitted an
Environmental Baseline for the Exploitation stage which to date is
under evaluation by the provincial mining authority.
All the Environmental Impact Assessments are
submitted to the Provincial Mining Directorate and subject to a
participatory evaluation and administrative process with provincial
authorities (Indigenous People Secretariat, Water Resources
Directorate, Environmental Ministry, Economy, and Production
Ministry, among others) and communities of influence, until the
final approval resolution is obtained.
In the case of Cauchari, the evaluation process
is carried out with the participation and dialogue of the
indigenous communities of Manantiales de Pastos Chicos, Olaroz
Chico, Huancar, Termas de Tuzgle de Puesto Sey, Catua, Paso de Jama
and Susques.
The Project has submitted an initial mine
closure plan within the Exploitation Environmental Impact
Assessment which is still under evaluation.
Permit Status
Exploration and mining activities are subject to
regulatory approval following an environmental impact assessment
(“EIA”), before initiating disturbance activities. The CPs
understand that Allkem (previously Advantage Lithium) obtained all
required approvals for the exploration drilling and testing
programs in the Salar.
Allkem is currently in the process of renewing
and maintaining required exploration-related permits while awaiting
approval of exploitation permitting. Further permits will be
required once exploitation is initialised.
There are no insurmountable risks identified at this time that
could cause the project to not proceed into potential
exploitation.
This release was authorised by Mr Martin Perez de
Solay, CEO and Managing Director of Allkem Limited.
Allkem LimitedABN 31 112 589 910 Level 35, 71
Eagle StBrisbane, QLD 4000 |
Investor Relations & Media EnquiriesAndrew
Barber M: +61 418 783 701 E:
Andrew.Barber@allkem.coPhoebe LeeP: +61 7 3064
3600 E: Phoebe.Lee@allkem.co |
Connect info@allkem.co+61 7 3064
3600www.allkem.co |
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IMPORTANT NOTICES
This investor ASX/TSX release (“Release”) has
been prepared by Allkem Limited (ACN 112 589 910) (the
“Company” or “Allkem”). It
contains general information about the Company as at the date of
this Release. The information in this Release should not be
considered to be comprehensive or to comprise all of the material
which a shareholder or potential investor in the Company may
require in order to determine whether to deal in Shares of Allkem.
The information in this Release is of a general nature only and
does not purport to be complete. It should be read in conjunction
with the Company’s periodic and continuous disclosure announcements
which are available at allkem.co and with the Australian Securities
Exchange (“ASX”) announcements, which are available at
www.asx.com.au.
This Release does not take into account the financial situation,
investment objectives, tax situation or particular needs of any
person and nothing contained in this Release constitutes
investment, legal, tax, accounting or other advice, nor does it
contain all the information which would be required in a disclosure
document or prospectus prepared in accordance with the requirements
of the Corporations Act 2001 (Cth) (“Corporations
Act”). Readers or recipients of this Release should,
before making any decisions in relation to their investment or
potential investment in the Company, consider the appropriateness
of the information having regard to their own individual investment
objectives and financial situation and seek their own professional
investment, legal, taxation and accounting advice appropriate to
their particular circumstances.
This Release does not constitute or form part of any offer,
invitation, solicitation or recommendation to acquire, purchase,
subscribe for, sell or otherwise dispose of, or issue, any Shares
or any other financial product. Further, this Release does not
constitute financial product, investment advice (nor tax,
accounting or legal advice) or recommendation, nor shall it or any
part of it or the fact of its distribution form the basis of, or be
relied on in connection with, any contract or investment
decision.
The distribution of this Release in other jurisdictions outside
Australia may also be restricted by law and any restrictions should
be observed. Any failure to comply with such restrictions may
constitute a violation of applicable securities laws.
Past performance information given in this Release is given for
illustrative purposes only and should not be relied upon as (and is
not) an indication of future performance.
Forward Looking StatementsForward-looking
statements are based on current expectations and beliefs and, by
their nature, are subject to a number of known and unknown risks
and uncertainties that could cause the actual results, performances
and achievements to differ materially from any expected future
results, performances or achievements expressed or implied by such
forward-looking statements, including but not limited to, the risk
of further changes in government regulations, policies or
legislation; risks that further funding may be required, but
unavailable, for the ongoing development of the Company’s projects;
fluctuations or decreases in commodity prices; uncertainty in the
estimation, economic viability, recoverability and processing of
mineral resources; risks associated with development of the Company
Projects; unexpected capital or operating cost increases;
uncertainty of meeting anticipated program milestones at the
Company’s Projects; risks associated with investment in publicly
listed companies, such as the Company; and risks associated with
general economic conditions.
Subject to any continuing obligation under applicable law or
relevant listing rules of the ASX, the Company disclaims any
obligation or undertaking to disseminate any updates or revisions
to any forward-looking statements in this Release to reflect any
change in expectations in relation to any forward-looking
statements or any change in events, conditions or circumstances on
which any such statements are based. Nothing in this Release shall
under any circumstances (including by reason of this Release
remaining available and not being superseded or replaced by any
other Release or publication with respect to the subject matter of
this Release), create an implication that there has been no change
in the affairs of the Company since the date of this Release.
Competent Person Statement The information in
this report that relates to Cauchari’s Exploration Results, Mineral
Resources and Ore Reserves is based on information compiled by
Frederik Reidel, CPG, who is a Competent Person (#11454) and a
Registered member of the American Institute of Professional
Geologist (AIPG) and Competent Person (# 390) with the Chilean
Mining Commission (CCCRRM) a ‘Recognised Professional Organisation’
(RPO) included in a list posted on the ASX website from time to
time. Frederik Reidel, an Atacama Water SpA employee has sufficient
experience that is relevant to the style of mineralisation and type
of deposit under consideration and to the activity being undertaken
to qualify as a Competent Person as defined in the 2012 Edition of
the ‘Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves’. Frederik Reidel consents to
the inclusion in this announcement of the matters based on their
information in the form and context in which it appears.
The scientific and technical information contained in this
announcement has been reviewed and approved by Frederik Reidel, CPG
(Atacama Water SpA) as it relates to geology, modelling, and
Mineral Resource and Ore Reserve estimates; Marek Dworzanowski,
FSAIMM, FIMMM, Chartered Engineer with the Engineering Council of
the United Kingdom registration (Metallurgical Engineer,
Independent Consultant), as it relates to processing, facilities,
infrastructure, project economics, capital and operating cost
estimates. The scientific and technical information contained in
this release will be supported by a technical report to be prepared
in accordance with National Instrument 43-101 – Standards for
Disclosure for Mineral Projects. The Technical Report will be filed
within 45 days of this release and will be available for review
under the Company’s profile on SEDAR at www.sedar.com.
Not for release or distribution in the United
StatesThis announcement has been prepared for publication
in Australia and may not be released to U.S. wire services or
distributed in the United States. This announcement does not
constitute an offer to sell, or a solicitation of an offer to buy,
securities in the United States or any other jurisdiction, and
neither this announcement or anything attached to this announcement
shall form the basis of any contract or commitment. Any securities
described in this announcement have not been, and will not be,
registered under the U.S. Securities Act of 1933 and may not be
offered or sold in the United States except in transactions
registered under the U.S. Securities Act of 1933 or exempt from, or
not subject to, the registration of the U.S. Securities Act of 1933
and applicable U.S. state securities laws.
APPENDIX A
JORC Table 1 – Section 1 Sampling
Techniques and Data related to Cauchari exploration
drilling (Criteria in this section apply to all succeeding
sections.)
Criteria |
JORC Code explanation |
Commentary |
Sampling techniques |
- Nature and quality of sampling (eg cut channels, random chips,
or specific specialised industry standard measurement tools
appropriate to the minerals under investigation, such as down hole
gamma sondes, or handheld XRF instruments, etc). These examples
should not be taken as limiting the broad meaning of sampling.
- Include reference to measures taken to ensure sample
representivity and the appropriate calibration of any measurement
tools or systems used.
- Aspects of the determination of mineralisation that are
Material to the Public Report.
- In cases where ‘industry standard’ work has been done this
would be relatively simple (eg ‘reverse circulation drilling was
used to obtain 1 m samples from which 3 kg was pulverised to
produce a 30 g charge for fire assay’). In other cases more
explanation may be required, such as where there is coarse gold
that has inherent sampling problems. Unusual commodities or
mineralisation types (eg submarine nodules) may warrant disclosure
of detailed information.
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- Holes which were drilled using rotary drilling or diamond
drilling techniques. Core was collected from diamond drill holes to
prepare "undisturbed" samples of porosity. Depth-representative
brine samples were collected via bailer in all holes. Drill
cuttings were collected on production well drilling.
- Core holes had recovery measured for each run and was collected
using polycarbonate (Lexan) tubes. Core drilling was carried out
using brackish water from margins of the Salar as drilling fluid
with organic tracer dye included. Samples with dye contamination
were discarded. On brine samples, 3 full well volumes of brine were
bailed prior to brine sampling.
- Brine samples were handled by experienced geoscientists with a
rigorous QA/QC program in place. An accredited laboratory was
selected as the primary laboratory to assay the brine samples, and
5 secondary QA/QC labs were used throughout the drilling
programs.
- Samples were not collected for assay from the cuttings, as the
primary objective of the holes was to confirm the geology to the
depth of drilling and install production wells. Cuttings were used
to describe the lithology. Samples for brine analysis were taken
from the production wells when cleaned up and pumped. Qualitative
changes in brine conditions were also evaluated during drilling.-
25 diamond holes were drilled in the two programs, with core
samples collected in polycarbonate (Lexan) tubes and selected
intervals analysed for porosity laboratory in an independent
lithology.- Brine samples were collected using a bailer and
following protocols developed by Allkem (Previously Orocobre) for
resource drilling at the Allkem operated Olaroz Project, Olaroz is
a lithium carbonate producing property. The Olaroz property has
been extensively studied and has been producing lithium carbonate
products since 2015. Brine samples were taken at 3 m intervals
during the 2011 program and at 6 m to 12 m intervals (due to deeper
holes) during the 2017/18 program. Up to 3 well volumes of brine
were bailed from the hole prior to sampling. The bailed brine
volume was adjusted based on the height of the brine column at each
sampling depth.
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Drilling techniques |
- Drill type (eg core, reverse circulation, open-hole hammer,
rotary air blast, auger, Bangka, sonic, etc) and details (eg core
diameter, triple or standard tube, depth of diamond tails,
face-sampling bit or other type, whether core is oriented and if
so, by what method, etc).
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- -Five Boart Longyear HQ (7.6cm) and NQ core (5cm) holes were
drilled between a depth of 46 and 249m for a total of 721 m in 2011
using polycarbonate (Lexan) tubes as opposed to a split triple
tube.- One rotary test hole was done at 31cm diameter to 150m.
Rotary drilling of five test production wells were drilled between
348 and 480m at 31cm in the upper part of the hole and 24cm in the
lower part of the hole.- Twenty Boart Longyear HQ holes were
drilled between a depth of 238 and 619m using polycarbonate (Lexan)
tubes as opposed to split triple tube.- All holes were drilled
vertical.
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Drill sample recovery |
- Method of recording and assessing core and chip sample
recoveries and results assessed.
- Measures taken to maximise sample recovery and ensure
representative nature of the samples.
- Whether a relationship exists between sample recovery and grade
and whether sample bias may have occurred due to preferential
loss/gain of fine/coarse material.
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- -Core recovery was measured for each run. The retrieved core
was subsampled by cutting off the bottom 15 cm of alternating 1.5 m
length lexan tubes (nominal 3 m intervals) for porosity analysis.
When cores were recovered to surface the lexan tube was pumped from
the core barrel using water and a plug separating tube and water.
Upon release from the core barrel tight fitting caps were applied
to both ends of the lexan tube. The lexan tube was then cleaned,
dried, and labeled. Thereafter, cores were split, and the lithology
was described by the on-site geological team.-A total of 2,052 m
was drilled with the rotary method during which cutting samples
were collected at 2 m intervals for geological logging using a hand
lens and binocular microscope. Cuttings were stored in chip
trays.
- Sample recovery in core holes was done using the lexan liners
as opposed to the split triple tubes.
- Cutting samples were not analysed chemically and descriptions
were a qualitative evaluation of the lithologies encountered in the
hole. There is no relationship between sample recovery and ion
concentrations in the brine in this case. Core sample recovery for
the two drilling programs was 76% and 70% in the 2011 and 2017/18
programs, respectively. Core sampling is enhanced by use of
polycarbonate (Lexan) triple tubes. Unconsolidated salt lake
sediments have much lower core recoveries than hard rock
deposits.
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Logging |
- Whether core and chip samples have been geologically and
geotechnically logged to a level of detail to support appropriate
Mineral Resource estimation, mining studies and metallurgical
studies.
- Whether logging is qualitative or quantitative in nature. Core
(or costean, channel, etc) photography.
- The total length and percentage of the relevant intersections
logged.
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- Core and drill cuttings were described by experienced
geoscientists on site. A detailed QA/QC program for accuracy,
precision and potential contamination of the brine sampling and
analytical process was implemented. Deviations are within the
acceptable ranges for different elements from the QA/QC program.
This is provided a consistent stratigraphy, supporting Mineral
Resource estimation and mining studies.
- -The core holes are qualitative and quantitative. It allows the
geoscientist to qualify the lithology, while quantitatively
providing porosity measurements.
- -Cutting logging is of a qualitative nature and results were
compared with the quantitative geophysical logs to interpret the
lithologies encountered in the hole.
- All intersections with sample recovery were logged.
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Sub-sampling techniques and sample
preparation |
- If core, whether cut or sawn and whether quarter, half or all
core taken.
- If non-core, whether riffled, tube sampled, rotary split, etc
and whether sampled wet or dry.
- For all sample types, the nature, quality and appropriateness
of the sample preparation technique.
- Quality control procedures adopted for all sub-sampling stages
to maximise representivity of samples.
- Measures taken to ensure that the sampling is representative of
the in situ material collected, including for instance results for
field duplicate/second-half sampling.
- Whether sample sizes are appropriate to the grain size of the
material being sampled.
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- Core samples were systematically sub-sampled for laboratory
analysis, by hand saw the lower 15 cm of core from the
polycarbonate core sample tube and capping the cut section and
taping the lids tightly to the core.The remaining core was stored
following Allkem (Previously Orocobre) protocols in wooden core
boxes at the Project’s on-site warehouse.
- Brine samples were taken using a bailer following protocols
developed by Allkem (Previously Orocobre) for resource
drilling.-Brine samples were taken using a bailer on 3m intervals
in the 2011 program and 6-12m in the 2017/18 program.-Sub samples
of core were created by pumping the lexan tube when it reached the
surface and labelling/storing the sample. Cutting lengths from the
bottom of each lexan liner was done for porosity testing. Prior to
taking water samples, up to three well volumes of brine were bailed
from the hole prior to sampling.
- Prior to taking brine samples, up to three well volumes of
brine were bailed from the hole prior to sampling. The bailed brine
volume was adjusted based on the height of the brine column at each
sampling depth. Core drilling was carried out using brackish water
from the margins of the Salar as drilling fluid. This fluid has a
Li concentration of less than 20 mg/L. Fluorescein, an organic
tracer dye was added to the drilling fluid to distinguish between
drilling fluid and natural formation brine. Detection of this
bright red dye in samples provided evidence of contamination from
drilling fluid and these samples were discarded.
- Duplicates, Standards and Blanks were used in the QA/QC program
as well as up to 5 external laboratories to verify the data.
- As samples are liquid based, they are appropriate for the
material.
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Quality of assay data and laboratory tests |
- The nature, quality and appropriateness of the assaying and
laboratory procedures used and whether the technique is considered
partial or total.
- For geophysical tools, spectrometers, handheld XRF instruments,
etc, the parameters used in determining the analysis including
instrument make and model, reading times, calibrations factors
applied and their derivation, etc.
- Nature of quality control procedures adopted (eg standards,
blanks, duplicates, external laboratory checks) and whether
acceptable levels of accuracy (i.e. lack of bias) and precision
have been established.
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- The chemical analysis of brine samples from the production
wells and exploratory drilling holes were carried out by the
primary (NorLab) and secondary labs (ASAMen and University of
Antofagasta). Analysis was conducted using analytical methods based
on the Standards Methods for the Examination of Water and
Wastewater, published by the American Public Health Association
(APHA) and the American Water Works Association (AWWA), 21st
edition, 2005, Washington DC.
- All tools used were in accordance with the ISO 9001
accreditation and consistent with ISO 17025 methods at other
laboratories.-For the 2011 sampling program, a suite of
inter-laboratory check samples was analysed at the University of
Antofagasta. These samples showed generally low RPD values between
the ASAMen and University of Antofagasta laboratory, suggesting
ASAMen analyses have an acceptable level of accuracy as well as
precision. Overall, the ASAMen results are considered of acceptable
accuracy and precision.-For the 2018 sampling program, checks
analyses were conducted at ASAMen on 5% of the primary brine
samples consisting of 42 external duplicate samples. The results of
standard duplicate and blank samples analyses are considered to be
adequate and appropriate for use in the resource estimation
described herein.
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Verification of sampling and assaying |
- The verification of significant intersections by either
independent or alternative company personnel.
- The use of twinned holes.
- Documentation of primary data, data entry procedures, data
verification, data storage (physical and electronic)
protocols.
- Discuss any adjustment to assay data.
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- Duplicate brine samples were presented to the
laboratories.
- A qualified individual reviewed the protocols for drilling,
sampling and testing procedures at the initial planning stage as
well as during the execution of the 2017/18 drilling and testing
programs in Salar de Cauchari. The qualified individual spent a
significant amount of time in the field during the 2017/18 field
campaign overlooking the implementation and execution of drilling,
testing, and sampling protocols.
- No adjustments to assay data are recorded.
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Location of data points |
- Accuracy and quality of surveys used to locate drill holes
(collar and down-hole surveys), trenches, mine workings and other
locations used in Mineral Resource estimation.
- Specification of the grid system used.
- Quality and adequacy of topographic control.
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- The holes were located initially with a hand-held GPS and are
subsequently surveyed by a certified surveyor. Production wells and
diamond holes are drilled with a variable spacing of 2-7 km between
holes. The Project location is in zone 3 of the Argentine Gauss
Kruger coordinate system with the Argentine POSGAR 94 datum.
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Data spacing and distribution |
- Data spacing for reporting of Exploration Results.
- Whether the data spacing and distribution is sufficient to
establish the degree of geological and grade continuity appropriate
for the Mineral Resource and Ore Reserve estimation procedure(s)
and classifications applied.
- Whether sample compositing has been applied.
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- -Exploration holes and wells are spaced between 2 and 7 km,
drilling to a depth of 46 and 249m in 2011, and between a depth of
238 and 619m in 2017/18.-Rotary drilling of five test production
wells were drilled between 348 and 480m.
- The CP considers that brine and core samples have been
collected in an acceptable manner, and the analysis of QA/QC
samples indicate that the results of the lithium concentration and
drainable porosity analyses are accurate and reliable for the use
in the resource estimate described for the Project.
- The samples taken during the pumping tests are composite
samples, sourced from a single well, but pulled from multiple well
screens within that one well.
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Orientation of data in relation to geological
structure |
- Whether the orientation of sampling achieves unbiased sampling
of possible structures and the extent to which this is known,
considering the deposit type.
- If the relationship between the drilling orientation and the
orientation of key mineralised structures is considered to have
introduced a sampling bias, this should be assessed and reported if
material.
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- The salar deposits that host lithium-bearing brines consist of
sub-horizontal beds and lenses of sand, silt, halite, clay and
minor gravels, depending on the location within the salar. Drill
holes are vertical and essentially perpendicular to these units
intersecting close to their true thickness.
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Sample security |
- The measures taken to ensure sample security.
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- - Brine samples were taken using bailer, packer and drive point
methods. In addition, a second sampling was carried out once
drilling was finished using Low Flow Sampling (LFS) equipment
inside the 3-inch diameter PVC slotted casing installed in each of
the DD boreholes. Prior to bottling, the sample was transferred to
a bucket, which had been rinsed with the same brine as the sample.
When necessary fine sediment was allowed to settle in the bucket
before the brine sample was transferred from the bucket to two 1
litre plastic bottles. The bottles were rinsed with the brine and
then filled to the top of the bottle removing any airspace and
capped. Bottles were labelled with the borehole number and sample
depth with permanent marker pens, and labels were covered with
transparent tape, to prevent labels being smudged or removed.
Samples with fluorescein contamination were noted at this point and
except in specific circumstances these were not sent for laboratory
analysis, due to the interpreted sample contamination.-A volume of
the same brine as the bottled sample was used to measure the
physical parameters: density (with a picnometer), temperature, pH,
Eh and in some samples dissolved oxygen. Details of field
parameters were recorded on paper tags, which were stuck to the
bottle with transparent tape when completed with sample
information.-Samples were transferred from the drill site to the
field camp where they were stored in an office out of direct
sunlight. Samples with suspended material were filtered to produce
a final 150 ml sample for the laboratory. Before being sent to the
laboratory the 150 ml bottles of fluid were sealed with tape and
labelled with a unique sample ticket number from a printed book of
sample tickets. The hole number, depth, date of collection, and
physical parameters of each sample number were recorded on the
respective pages of the sample ticket book and in a spreadsheet
control of samples. Photographs were taken of the original 1-liter
sample bottles and the 150 ml bottles of filtered brine to document
the relationship of sample numbers, drill holes and depths.
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Audits or reviews |
- The results of any audits or reviews of sampling techniques and
data.
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- No audits or reviews have been conducted at this point in time
outside of the qualified individual.
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Section 2 - Reporting of Exploration
Results
(Criteria listed in the preceding section also apply to this
section.)
Criteria |
JORC Code explanation |
Commentary |
Mineral tenement and land tenure status |
- Type, reference name/number, location and ownership including
agreements or material issues with third parties such as joint
ventures, partnerships, overriding royalties, native title
interests, historical sites, wilderness or national park and
environmental settings.
- The security of the tenure held at the time of reporting along
with any known impediments to obtaining a licence to operate in the
area.
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- -Cauchari (latitude 23° 29’ 13.19” South, longitude 66° 42’
34.30” West), which is located immediately south of, and has
similar brine characteristics to, Olaroz, wholly owned by Allkem.
Cauchari is located in the Puna region, 230 kilometres west of the
city of San Salvador de Jujuy in Jujuy Province of northern
Argentina and is at an altitude of 3,900 meters above sea level.
The property is to the south near paved Hwy. 52 that connects with
the international border with Chile (80 km to the west) and the
major mining centre of Calama and the ports of Antofagasta and
Mejillones in northern Chile, both major ports for the export of
mineral commodities and import of mining equipment.-The Cauchari
tenements cover 28,584 ha and consist of 23 mining/exploitation
permits which were initially applied for on behalf of South
American Salars (SAS). There is an agreement between the vendors of
these tenements and SAS.-SAS is a joint venture company with the
beneficial owners being Advantage Lithium (AAL) with a 75% interest
and La Frontera with a 25% stake. La Frontera is an Argentine
company 100% owned by Orocobre Ltd. Orocobre acquired all
outstanding shares of AAL on February 19, 2020, and gained the full
(100 %) control of the Project. Orocobre merged with Galaxy Lithium
to form Allkem Limited on 21 August 2021. Allkem indirectly owns
100% of the Cauchari tenements.-The Argentine federal government
regulates the ownership of Mineral Resources, although mining
properties are administered by the provinces. Therefore, and in
accordance with the Jujuy Provincial Constitutional Law, Provincial
Law 5791/13, Resolution 1641-DPR-2023 and other related regulatory
decrees and complementary rules, SAS will be required to pay
monthly royalties as consideration for the minerals extracted from
its concessions. Monthly royalties are equivalent to 3% of the mine
head value of the mineral extracted, calculated as the sales price
less direct cash costs related to exploitation and excluding
depreciation of fixed assets. SAS expects to pay to the Province of
Jujuy a royalty of the type, once the approval of the Exploitation
Environmental Impact Assessment has been approved and the
exploitation and production activities have effectively
started.
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Exploration done by other parties |
- Acknowledgment and appraisal of exploration by other
parties.
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- -The properties were not subject to any exploration for lithium
prior to Allkem (Previously Orocobre) obtaining the properties.-
Significant exploration has been conducted to the east and north of
the Cauchari properties by Minera Exar, resulting in a large
resource and related reserve and a brine pumping project is
currently in construction. Further north is the Olaroz Project,
Allkem Limited has defined a 15.7 Mt LCE Mineral resource in
Measured and Indicated categories and 7.3 Mt of Inferred Mineral
Resources. These three projects are all developed on different
parts of the same lithium brine body.
|
Geology |
- Deposit type, geological setting and style of
mineralisation.
|
- - The project is a lithium salt lake deposit, located in a
closed basin in the Andean mountain range in Northern Argentina-
The sediments within the salar consist of halite, clay, silt, sand
and gravel which have accumulated in the salar from terrestrial
sedimentation from the sides of the basin. Brine hosting dissolved
lithium is present in pore spaces and fractures within
unconsolidated sediments.- Evaporation of brines entering and
within the salt lake generates the concentrated lithium that is
extracted by pumping out the brine.-The sediments are interpreted
to be essentially flat lying with unconfined aquifer conditions
close to surface and semi-confined to confined conditions at
depth.- Geology was recorded during drilling of the hole if rotary
and after the core reached the surface if a diamond drill
hole.
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Drill hole Information |
- A summary of all information material to the understanding of
the exploration results including a tabulation of the following
information for all Material drill holes:
- easting and northing of the drill hole collar
- elevation or RL (Reduced Level – elevation above sea level in
metres) of the drill hole collar
- dip and azimuth of the hole
- down hole length and interception depth
- hole length.
- If the exclusion of this information is justified on the basis
that the information is not Material and this exclusion does not
detract from the understanding of the report, the Competent Person
should clearly explain why this is the case.
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- The holes are located in the mining properties covering the
Cauchari salt lake, centred around approximately 7377500N/ 3425000E
and approximately 3900 m elevation, in Zone 3 of the Argentine
Gauss Kruger grid system, using the Posgar 94 datum. The drill
holes are all vertical, (dip -90, azimuth 0 degrees). On the salt
lake brine is present from within ~1 m of surface to the base of
drilling.
https://www.globenewswire.com/NewsRoom/AttachmentNg/27191334-f43d-4e45-90f7-c19084b65394
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Data aggregation methods |
- In reporting Exploration Results, weighting averaging
techniques, maximum and/or minimum grade truncations (eg cutting of
high grades) and cut-off grades are usually Material and should be
stated.
- Where aggregate intercepts incorporate short lengths of high
grade results and longer lengths of low grade results, the
procedure used for such aggregation should be stated and some
typical examples of such aggregations should be shown in
detail.
- The assumptions used for any reporting of metal equivalent
values should be clearly stated.
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- The pumping well samples are composite samples that reflect
inflows from different levels within the wells, which are screened
at multiple levels throughout their depth. The lithium
concentration in the pumped samples is an average of the
concentration from different units with relatively higher and lower
values than the average. More permeable units contribute a higher
proportion of the brine in the pumped samples.
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Relationship between mineralisation widths and intercept
lengths |
- These relationships are particularly important in the reporting
of Exploration Results.
- If the geometry of the mineralisation with respect to the drill
hole angle is known, its nature should be reported.
- If it is not known and only the down hole lengths are reported,
there should be a clear statement to this effect (eg ‘down hole
length, true width not known’).
|
- The sediments hosting brine are interpreted to be essentially
perpendicular to the vertical drill holes, representing true
thicknesses in drilling. The entire thickness of sediments is
believed to be mineralized with lithium brine, with the water table
within approximately 1 metre of surface. Lithium is hosted in brine
in pores within the different terrestrial sedimentary units in the
salt lake sequence.
|
Diagrams |
- Appropriate maps and sections (with scales) and tabulations of
intercepts should be included for any significant discovery being
reported These should include, but not be limited to a plan view of
drill hole collar locations and appropriate sectional views.
|
https://www.globenewswire.com/NewsRoom/AttachmentNg/98809563-a3e6-41d9-b1e9-4cd4a81db659Location
map of
boreholes.https://www.globenewswire.com/NewsRoom/AttachmentNg/ced5a720-2ae9-46cb-b0e3-b878e7853600W-E
section looking north through the Cauchari JV geological
model.https://www.globenewswire.com/NewsRoom/AttachmentNg/e62c4656-0334-48e1-b11d-ebd92170e87eW-E
section looking north, showing the progressive inter-fingering of
the Archibarca fan with the Clay and Halite
units.https://www.globenewswire.com/NewsRoom/AttachmentNg/eff51b2d-dabf-4dcb-95ba-028dcd986019W-E
section looking north between boreholes CAU16D and
CAU10R.https://www.globenewswire.com/NewsRoom/AttachmentNg/e7c0c9d0-c02c-451f-b51d-b5e19baa92f0Section
showing the interpreted geometry of the East Fan unit. |
Balanced reporting |
- Where comprehensive reporting of all Exploration Results is not
practicable, representative reporting of both low and high grades
and/or widths should be practiced to avoid misleading reporting of
Exploration Results.
|
- Standards analysis results from ASA Mendoza
(2011).https://www.globenewswire.com/NewsRoom/AttachmentNg/d8f09484-5608-4573-9930-24c6448be358
|
Other substantive
exploration data |
- Other exploration data, if meaningful and material, should be
reported including (but not limited to): geological observations;
geophysical survey results; geochemical survey results; bulk
samples – size and method of treatment; metallurgical test results;
bulk density, groundwater, geotechnical and rock characteristics;
potential deleterious or contaminating substances.
|
- The following Geophysical exploration has been performed at the
Cauchari site.-In 2009 geophysical surveys undertaken by Allkem
(Previously Orocobre) in Cauchari consisted of three coincident
Audio Magnetotelluric (AMT) and gravity lines aimed at mapping the
basin geometry and
depth.https://www.globenewswire.com/NewsRoom/AttachmentNg/a180c4e0-0127-4460-9b15-b1923977e147-Gravity
surveys were completed in 2009 and 2016 aimed at determining
subsurface structure and lithology. The gravity survey confirmed
the geometry of the Cauchari basin is similar to the findings of
the 2009 AMT survey, with the deepest part of the basin on the
eastern side.-A time domain electromagnetic (TEM) survey was
undertaken in 2018 to assist in mapping the brine body, which
clearly identified the unsaturated zone, fresh to brackish water,
the transition to brine and the brine body itself, as well as
basement features on the margins of the survey area, near
outcropping rocks. This information has been incorporated into the
geological and resource model for the Project, as diamond drilling
has provided useful information to validate the TEM profiles.
- Preliminary 48-hr pumping tests were completed on the first
test production wells. Additionally, 30-day pumping tests were
performed to determine water level maximum drawdown and recovery
time.
|
Further work |
- The nature and scale of planned further work (eg tests for
lateral extensions or depth extensions or large-scale step-out
drilling).
- Diagrams clearly highlighting the areas of possible extensions,
including the main geological interpretations and future drilling
areas, provided this information is not commercially
sensitive.
|
- -In the Northwest wellfield area, two additional test
production wells are installed in the lower Archibarca unit to
verify the lateral continuity of the low permeability units (and/or
anisotropy) between the upper freshwater aquifer and the underlying
brine unit. Each well site will require the completion of two
adjacent monitoring wells with isolated screened intervals in the
upper and lower units. Complete 7-day pumping trials in each new
test production well.-A minimum of 10 additional mini-piezometers
are installed at the toe of the Archibarca Fan and new evaporation
measurements are undertaken to refine the water balance.-Low flow
sampling is carried out in CAU7M350, CAU17D, CAU18D, CAU20D, and
21D at five selected depth intervals to verify previous chemistry
analysis.
- -In the Southeast wellfield area, a minimum of 3 diamond core
exploration holes are drilled to convert Inferred Mineral Resource
into Indicated Mineral Resources to a depth of 600 m in the SE
Sector (Lower Sand and Halite/Clay units).-A spinner log test
should be carried out in CAU11R during a short new pumping test to
verify the CAU11R pumping test results and interpretation.-A new
test production well and two adjacent monitoring wells should be
drilled targeting the Lower Sand unit and a 20-day pumping test is
completed.
- For regional hydrogeology, five multi-level piezometers are
installed in and around the Salar to improve the understanding of
the distribution of piezometric heads. Groundwater samples should
be taken from each multi-piezometer.
|
Section 3 Estimation and Reporting of Mineral
Resources
Criteria |
JORC Code explanation |
Commentary |
Database integrity |
- Measures taken to ensure that data has not been corrupted by,
for example, transcription or keying errors, between its initial
collection and its use for Mineral Resource estimation
purposes.
- Data validation procedures used.
|
- Procedures and Protocols reviewed and implemented.
- Drilling, sampling and testing procedures of Initial and
2017/2018 drillhole campaign have been careful reviewed.
|
Site visits |
- Comment on any site visits undertaken by the Competent Person
and the outcome of those visits.
- If no site visits have been undertaken indicate why this is the
case.
|
- Frederik Reidel, last visited the Cauchari site in August
2019.
- Mr. Marek Dworzanowski last visited the Cauchari Project area
in July of 2018.
|
Geological interpretation |
- Confidence in (or conversely, the uncertainty of ) the
geological interpretation of the mineral deposit.
- Nature of the data used and of any assumptions made.
- The effect, if any, of alternative interpretations on Mineral
Resource estimation.
- The use of geology in guiding and controlling Mineral Resource
estimation.
- The factors affecting continuity both of grade and
geology.
|
- There is a high level of confidence in the geological model for
the Project. There are distinct 6 major geological units in clastic
sediments and halite.
- -The orebody is defined as a mixed style salar, with a halite
nucleus in the centre of the salar overlain with up to 50m of fine
grained (clay) sediments. The lithology within the Salar is
variable with halite and halite mixed units, clay and gravel-
sand-silt-clay sized mixes spanning the full range of sediment
types.-Interpretation is based on drill core and cuttings, drilling
and test results, brine chemistry and porosity laboratory analysis,
aquifer testing results, geophysical survey and other information
available from the work carried out between 2011 and 2019.
- Drainable porosity analyses were carried out on undisturbed
core samples by laboratories GSA, DBSA and BGS. Permeability has
been determined based on pumping tests within the salar and
adjacent mining properties.
- Low correlations of porosity results are found between internal
and external laboratories.
|
Dimensions |
- The extent and variability of the Mineral Resource expressed as
length (along strike or otherwise), plan width, and depth below
surface to the upper and lower limits of the Mineral Resource.
|
- -The Mineral Resource model covers 117.7 km2. The top coincides
with the brine level in the salar, measured by monitoring wells and
geophysical TEM and SEV tests.- The lateral boundaries are defined
based on the Cauchari tenements and by the brine / freshwater
interface along the eastern and western limits of the Salar as
based on the physical TEM and SEV boreholes.- The bottom of the
model coincides with a surface created from the bottom of the
boreholes.
|
Estimation and modelling techniques |
- The nature and appropriateness of the estimation technique(s)
applied and key assumptions, including treatment of extreme grade
values, domaining, interpolation parameters and maximum distance of
extrapolation from data points. If a computer assisted estimation
method was chosen include a description of computer software and
parameters used.
- The availability of check estimates, previous estimates and/or
mine production records and whether the Mineral Resource estimate
takes appropriate account of such data.
- The assumptions made regarding recovery of by-products.
- Estimation of deleterious elements or other non-grade variables
of economic significance (eg sulphur for acid mine drainage
characterisation).
- In the case of block model interpolation, the block size in
relation to the average sample spacing and the search
employed.
- Any assumptions behind modelling of selective mining
units.
- Any assumptions about correlation between variables.
- Description of how the geological interpretation was used to
control the resource estimates.
- Discussion of basis for using or not using grade cutting or
capping.
- The process of validation, the checking process used, the
comparison of model data to drill hole data, and use of
reconciliation data if available.
|
- Stanford Geostatistical Modeling Software (SGeMS) was used for
the Cauchari Mineral Resources estimation. Histograms, probability
plots and box plots are conducted for the Exploratory Data Analysis
(EDA) for lithium.
- The block size geometry is 100m x 100m x 1m.
- Undisturbed valid samples from drill cores defines the specific
yield values. De-clustered average spatial sample density was used
to assign values to each geological unit.
- Brine concentration based on lithium distribution
concentrations, are result of a total of 546 brine sample analysis.
Porosity values for each geological unit are estimated by using the
de-clustered porosity average.
- Techniques for modelling are well established. The definition
of aquifer geometry is based on drilling and geophysical methods.
Hydrogeological analyses are captured by surface and groundwater
inflows, evaporation rates and water chemistry data. Lithology,
specific yield and grade variation are based on drilling
database.
- Modelling considers 3 domains: - Transition domain in the upper
part of the salar which includes fresher water and transition into
pure brine. It represents only 5% of the total Mineral Resources
and it contains low brine samples collection compensated with good
concentration correlations with depths. -Main Domain. Reliable
sample data based on kriging covering 83% of the total Mineral
Resources. - Secondary data domain. Based on brine chemistry
analysis, it represents the 12% of the total Mineral Resources and
inverse distance estimation method was used.
- Kriging within strata (KWS) was used for lithium based on
orthogonal variograms and it is considered as adequate for the
estimation. Lithium was estimated independently. Significant
variability of lithium concentration was detected between
geological units. No assumptions were made about correlation
between variables.
- To validate the accuracy of our estimation models, a
comprehensive series of checks was conducted. These checks
encompassed various techniques, including the comparison of
univariate statistics, visual inspections, swath plots, and block
comparison analyses.
|
Moisture |
- Whether the tonnages are estimated on a dry basis or with
natural moisture, and the method of determination of the moisture
content.
|
- -Moisture content of the cores was Measured (porosity and
density measurements were made), but as brine is extracted by
pumping not mining the sediments moisture is not relevant for the
Mineral Resource estimation.-Tonnages are estimated as metallic
lithium and dissolved in brine, with lithium values converted to a
lithium carbonate tonnage using a conversion factor of 5.323.
|
Cut-off parameters |
- The basis of the adopted cut-off grade(s) or quality parameters
applied.
|
- A lithium cut-off grade of 300 mg/L was utilised based on a
breakeven cut-off grade for a projected lithium carbonate
equivalent price of US$ 20,000 per tonne over the entirety of the
LOM and a grade-tonnage curve. Considering the economic value of
the brine against production costs, the applied cut-off grade for
the Mineral Resource estimate (300 mg/L) is believed to be
conservative in terms of the overall estimated Mineral
Resource.
|
Mining factors or assumptions |
- Assumptions made regarding possible mining methods, minimum
mining dimensions and internal (or, if applicable, external) mining
dilution. It is always necessary as part of the process of
determining reasonable prospects for eventual economic extraction
to consider potential mining methods, but the assumptions made
regarding mining methods and parameters when estimating Mineral
Resources may not always be rigorous. Where this is the case, this
should be reported with an explanation of the basis of the mining
assumptions made.
|
- -The Mineral Resource has been quoted in terms of brine volume,
concentration of lithium, and their product lithium carbonate
(LCE).-No mining or recovery factors have been applied (although
the use of the specific yield = drainable porosity is used to
reflect the reasonable prospects for economic extraction with the
proposed mining methodology). It should be noted that conversion of
Mineral Resources to Ore Reserves for brine deposits is lower than
that for hard rock deposits.-Dilution of brine concentrations may
occur over time and typically there are lithium losses in both the
ponds and processing plant in brine mining operations. However,
potential dilution will be estimated in the groundwater model
simulating brine extraction, to define a Ore Reserve.-The planned
mining method is recovering brine from the subsurface below the
salt lake via a network of production wells, the established
practice on existing lithium brine projects.-Detailed hydrologic
studies of the lake have been undertaken (catchment and groundwater
modelling) to evaluate the extractable resources and potential
extraction rates.
|
Metallurgical factors or assumptions |
- The basis for assumptions or predictions regarding
metallurgical amenability. It is always necessary as part of the
process of determining reasonable prospects for eventual economic
extraction to consider potential metallurgical methods, but the
assumptions regarding metallurgical treatment processes and
parameters made when reporting Mineral Resources may not always be
rigorous. Where this is the case, this should be reported with an
explanation of the basis of the metallurgical assumptions
made.
|
- Lithium carbonate is projected to be produced on site via
conventional brine processing techniques and evaporation ponds to
concentrate the brine prior to processing as currently Olaroz
operation does. Brine composition from Cauchari could be processed
using similar processing technology to that applied in the Olaroz
production facility, which has been successfully applied to produce
lithium carbonate in the Allkem facilities.
|
Environmental factors or assumptions |
- Assumptions made regarding possible waste and process residue
disposal options. It is always necessary as part of the process of
determining reasonable prospects for eventual economic extraction
to consider the potential environmental impacts of the mining and
processing operation. While at this stage the determination of
potential environmental impacts, particularly for a greenfields
project, may not always be well advanced, the status of early
consideration of these potential environmental impacts should be
reported. Where these aspects have not been considered this should
be reported with an explanation of the environmental assumptions
made.
|
- -Impacts of the lithium carbonate production operation at the
Cauchari salar include; surface disturbance from the creation of
extraction/processing facilities and associated infrastructure,
accumulation of various salt tailings impoundments and extraction
from brine and freshwater aquifers regionally. Lime is used to
increase precipitation of impurities like magnesium and calcium
solids. Precipitated salts are collected from evaporation ponds and
stockpiled on the salar surface.-An industrial waste yard and
warehouses are provided for waste separation and storage, according
to its specifications (hazardous and non-hazardous), and later on
transported to authorized disposal centers, according to
regulations for each waste type.
|
Bulk density |
- Whether assumed or determined. If assumed, the basis for the
assumptions. If determined, the method used, whether wet or dry,
the frequency of the measurements, the nature, size and
representativeness of the samples.
- The bulk density for bulk material must have been measured by
methods that adequately account for void spaces (vugs, porosity,
etc), moisture and differences between rock and alteration zones
within the deposit.
- Discuss assumptions for bulk density estimates used in the
evaluation process of the different materials.
|
- Density measurements were taken as part of the drill core
assessment. This included determining dry density and particle
density as well as field measurements of brine density. Note that
no mining of sediments is to be carried out, as brine is to be
extracted by pumping and consequently sediments are not mined but
the lithium is extracted by pumping.
- No bulk density was applied to the estimates because resources
are defined by volume, rather than by tonnage.
- The salt units can contain fractures porosity which can host
brine and add to the drainable porosity.
|
Classification |
- The basis for the classification of the Mineral Resources into
varying confidence categories.
- Whether appropriate account has been taken of all relevant
factors (ie relative confidence in tonnage/grade estimations,
reliability of input data, confidence in continuity of geology and
metal values, quality, quantity and distribution of the data).
- Whether the result appropriately reflects the Competent
Person’s view of the deposit.
|
- The resource has been classified in Measured, Indicated and
Inferred Mineral Resources categories based on the spatial
distribution of data and confidence in the estimation.-Measured
Mineral Resource reflect higher confidence in the geological
interpretation of the salar and the greater frequency of data. It
has been applied in the upper levels and SE sector of the project,
covering Archibarca fan, clay and halite units.-Indicated Mineral
Resource is found in the deeper portions of the clay and halite
units, the west fan area, the upper part of east fan unit and the
lower sand unit to a depth of 500m.-The Inferred Mineral Resource
outlies deeper pockets of the archibarca fan area, the lower dand
below 500m depth, the limits of the property in the east and the
east fan below the transition domain.
- In the view of the Competent Person the Mineral Resource
classification is believed to adequately reflect the available data
and takes into account and is consistent with the CIM guidelines
and reflect level of hydrogeological knowledge, sample availability
and quality.
|
Audits or reviews |
- The results of any audits or reviews of Mineral Resource
estimates.
|
|
Discussion of relative accuracy/ confidence |
- Where appropriate a statement of the relative accuracy and
confidence level in the Mineral Resource estimate using an approach
or procedure deemed appropriate by the Competent Person. For
example, the application of statistical or geostatistical
procedures to quantify the relative accuracy of the resource within
stated confidence limits, or, if such an approach is not deemed
appropriate, a qualitative discussion of the factors that could
affect the relative accuracy and confidence of the estimate.
- The statement should specify whether it relates to global or
local estimates, and, if local, state the relevant tonnages, which
should be relevant to technical and economic evaluation.
Documentation should include assumptions made and the procedures
used.
- These statements of relative accuracy and confidence of the
estimate should be compared with production data, where
available.
|
- Mineral Resources estimation is affected by the behaviour of
the hydrogeological units in the Archibarca fan under pumping
conditions. Greater than forecasted mixing of the pumped brine with
freshwater from the upper aquifer in the Archibarca fan could lead
to lower Li concentrations in the pumped brine than forecasted.
Additional drilling and testing in this area is recommended to
reduce this potential risk.
- An assessment of the estimated blocks was made against the
drill hole data on sections and found to be acceptable.
|
Section 4 Estimation and Reporting of
Ore Reserves
Criteria |
JORC Code explanation |
Commentary |
Mineral Resource estimate for conversion to Ore
Reserves |
- Description of the Mineral Resource estimate used as a basis
for the conversion to an Ore Reserve.
- Clear statement as to whether the Mineral Resources are
reported additional to, or inclusive of, the Ore Reserves.
|
- The Mineral Resource used as the basis for the Ore Reserve
estimate was based on a geological model. A numerical groundwater
flow and transport model using FEFLOW 7.1 by the DHI Group with the
guidance of Atacama Water, considering calibration under pre-mining
and steady conditions, in transient mode for pumping tests, to
simulate brine abstraction to support annual LCE production and to
evaluate configurations and pumping schedules in order to minimise
the potential dilution of lithium concentrations in the discharge
of the production wells.
- Mineral Resources are reported inclusive of Ore Reserves.
|
Site visits |
- Comment on any site visits undertaken by the Competent Person
and the outcome of those visits.
- If no site visits have been undertaken indicate why this is the
case.
|
- Frederik Reidel, last visited the Cauchari site in August
2019.
- Mr. Marek Dworzanowski last visited the Cauchari Project area
in July of 2018
|
Study status |
- The type and level of study undertaken to enable Mineral
Resources to be converted to Ore Reserves.
- The Code requires that a study to at least Pre-Feasibility
Study level has been undertaken to convert Mineral Resources to Ore
Reserves. Such studies will have been carried out and will have
determined a mine plan that is technically achievable and
economically viable, and that material Modifying Factors have been
considered.
|
- The Cauchari project is based on a Pre-feasibility study
developed in 2019.
- A subsequent technical report is performed to update project
Mineral Resources, cost estimates and economics and to be issued to
Allkem's listing on the New York Stock Exchange (NYSE), as of 30
June 2023.
|
Cut-off parameters |
- The basis of the cut-off grade(s) or quality parameters
applied.
|
- -The Cauchari brine project is a very large salt lake which
hosts lithium dissolved in hypersaline brine presented in pore
spaces between sediment grains. The brine mineralisation in the
Mineral Resource covers an area of 117.7 km2, within a larger area
also known to contain lithium mineralised brine. The lithium
concentration has been found variable according to the different
geological units identified. There is no internal waste (uneconomic
lithium concentrations) within the Mineral Resource. Future
additional developments may utilise direct extraction
technologies.-A cut-off grade of 300 mg/l was applied for Mineral
Resources estimates. The PFS wellfield configuration maintains LOM
Li concentrations from all pumping wells above 350 mg/L, which is
considered a practical cut-off concentration or the lithium Ore
Reserve estimate.
|
Mining factors or assumptions |
- The method and assumptions used as reported in the
Pre-Feasibility or Feasibility Study to convert the Mineral
Resource to an Ore Reserve (i.e. either by application of
appropriate factors by optimisation or by preliminary or detailed
design).
- The choice, nature and appropriateness of the selected mining
method(s) and other mining parameters including associated design
issues such as pre-strip, access, etc.
- The assumptions made regarding geotechnical parameters (eg pit
slopes, stope sizes, etc), grade control and pre-production
drilling.
- The major assumptions made and Mineral Resource model used for
pit and stope optimisation (if appropriate).
- The mining dilution factors used.
- The mining recovery factors used.
- Any minimum mining widths used.
- The manner in which Inferred Mineral Resources are utilised in
mining studies and the sensitivity of the outcome to their
inclusion.
- The infrastructure requirements of the selected mining
methods.
|
- -Mining is undertaken primary with entirely cemented and sealed
production wells down to 140m in the NW area. Below that level,
large diameters will be used (12 inch installed casing). Once
installed and developed the wells are pumped to provide a
continuous supply of brine to the project evaporation ponds. For
the SE area, production wells will be drilled and completed to a
depth of 460 m with 12 inch diameter stainless steel production
screens. These wells will discharge through feeder pipelines into
an intermediate storage pond and then to the evaporation ponds.-The
wells provide an average lithium concentration that is derived from
the sediments where production wells.-Only a portion of the project
Mineral Resource can be extracted, due to the limitations of
extraction by widely spaced wells. This amount was simulated in the
groundwater model which is the basis for the project Ore Reserve,
and which takes account of factors which control the behaviour of
the salt lake environment during extraction.
- Extraction using wells is the appropriate extraction choice in
salt lakes, as the lithium is dissolved in brine (fluid) and mining
of unconsolidated sediments is not contemplated.
- Geotechnical parameters for brine extraction are different to
hard rock mining and consider issues such as compaction and
settlement of sediments over time as brine is extracted.
- Mining dilution factor is not relevant for brine mining.
- There are no minimum mining widths, as brine mining is not a
selective mining method.
- -Indicated Mineral Resources of 894,000t LCE contained in the
West Fan Unit are not included in this PFS production profile.-The
Inferred Mineral Resources are not included in current mining
studies but are considered a possible source of future brine
extraction, when their resource classification is upgraded.
- Brine mining requires the provision of electricity and
pipelines to the sites of wells from which brine is extracted. The
pipelines pump brine to centralised collection ponds, from where it
is pumped to the evaporation pond network. The brine is subject to
the addition of lime in the evaporation ponds. Pumps are required
to move brine between ponds and pump brine into the plant, where
lithium carbonate product is produced. A 6" diameter gas pipeline
will provide the energy source for onsite electricity and heat
generation.
|
Metallurgical factors or assumptions |
- The metallurgical process proposed and the appropriateness of
that process to the style of mineralisation.
- Whether the metallurgical process is well-tested technology or
novel in nature.
- The nature, amount and representativeness of metallurgical test
work undertaken, the nature of the metallurgical domaining applied
and the corresponding metallurgical recovery factors applied.
- Any assumptions or allowances made for deleterious
elements.
- The existence of any bulk sample or pilot scale test work and
the degree to which such samples are considered representative of
the orebody as a whole.
- For minerals that are defined by a specification, has the ore
reserve estimation been based on the appropriate mineralogy to meet
the specifications?
|
- The metallurgical process utilised for the production of
lithium carbonate is based on solar evaporation of brine, prior to
reacting lithium with carbon dioxide in the plant to produce
lithium carbonate. In this way much of the energy required for the
process is provided naturally by the sun. Lithium preferentially
remains within the brine, and other elements precipitate from the
brine in response to their increasing concentration and saturation
in the brine. Lime is added to the ponds in order to facilitate the
precipitation of magnesium from the brine. Although more recent
direct extraction processing techniques are more widely available
pond evaporation provides a cost-effective processing method.
- Production level brine evaporation and metallurgical recovery
test work at the Cauchari site has not progressed as of the
Effective Date. The Cauchari process design is approximated from
previously completed Allkem’s Olaroz Project test work, results and
performance. The Olaroz process design has been successfully proven
to produce lithium carbonate since 2015.
- Modifications to the Olaroz technology mean brines will be
drained and salts harvested in all ponds. Transfer pumps will be
used to transfer concentrated brine from a lower concentration pond
into a higher concentration pond. A second liming stage will be
installed to maximise magnesium ion removal before brine enters the
production facilities and an ion-exchange stage will be installed
to remove remaining calcium and magnesium ions before precipitating
technical grade lithium carbonate.
- Pilot scale evaporation test work for the Cauchari site is
being considered.
- Lithium Carbonate is sold as both technical and battery grade
product, depending on the purity of the product. The planned
project will produce both grades of product.
|
Environmental |
- The status of studies of potential environmental impacts of the
mining and processing operation. Details of waste rock
characterisation and the consideration of potential sites, status
of design options considered and, where applicable, the status of
approvals for process residue storage and waste dumps should be
reported.
|
- -The project had completed exploration programs since 2011 and
the last EIA approval was in 2017 for exploration stage.
Environmental baseline was submitted in 2019 and is under
evaluation by the provincial mining authority. Allkem is currently
in the process of renewing and maintaining required exploration
related permits while awaiting approval of exploitation permitting.
As part of the EIA, a comprehensive consultation was undertaken
with members of the local communities, regarding the Project
development and its associated opportunities for the community
members. From start, the company has been actively involved in
community relations.-A small fraction of waste solids are generated
in the lithium carbonate plant, that are mainly impurities removed
from the brine. The main solids are a mixture of magnesium
hydroxide and calcium carbonate.-Residual salts that are
precipitated in evaporation ponds will be harvested and stored in
stock piles on the surface of the salar.
|
Infrastructure |
- The existence of appropriate infrastructure: availability of
land for plant development, power, water, transportation
(particularly for bulk commodities), labour, accommodation; or the
ease with which the infrastructure can be provided, or
accessed.
|
- -The project is well served by infrastructure, being located
closed to a paved international highway between Argentina and Chile
that leads to major import and export ports in Northern Chile.
Locally, the project is reached by paved and unpaved roads from
either the Salta or Jujuy Provinces. Both Jujuy and Salta have
international airports with regular flights to Buenos Aires.-Site
infrastructure will consist of the main processing facilities
including brine well fields and pumping, evaporation ponds, process
plant and waste storage-The brine production wellfields will be
located on two sectors of the Salar de Cauchari, one in the
Archibarca area, near and among the initial evaporation ponds and
another located south-east. Brine wells will be equipped with
variable speed drive submersible pumps and surface booster stations
to deliver brine to the evaporation ponds.-The evaporation ponds
will cover an area of approximately 10.5 million m2 in Years 1-5
and increase to 11.3m2 for years 6-9 and 12.2m2 from year 10
onwards.-The processing plant will consist of a liming plant to
support evaporation pond processes, and a lithium carbonation plant
to produce final product. The processing plant will be supported by
service infrastructure such as reagents mixing, fuel and storage
facility, sulfuric acid preparation, compressors and boilers, and
water treatment plants.-The Project’s accommodation camp will be
built to the west of the lithium carbonate plant, at a reasonable
distance. The camp will include several facilities of modular type
construction including dormitories, dining rooms, recreational
areas and medical facilities. During the construction phase,
additional temporary modular facilities will be employed to expand
the temporary peak labour requirements. The process facility,
support services and accommodation infrastructure are deemed
adequate to support the planned facility operation and production
rate.-The Project support and process infrastructure has been
reviewed and is deemed adequate by the CP to support the process
and operations described in the report.
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Costs |
- The derivation of, or assumptions made, regarding projected
capital costs in the study.
- The methodology used to estimate operating costs.
- Allowances made for the content of deleterious elements.
- The derivation of assumptions made of metal or commodity
price(s), for the principal minerals and co- products.
- The source of exchange rates used in the study.
- Derivation of transportation charges.
- The basis for forecasting or source of treatment and refining
charges, penalties for failure to meet specification, etc.
- The allowances made for royalties payable, both Government and
private.
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- -Costs estimates and economic assessments for the 25,000 tpa
processing facility are at a AACE Class 4 +30% / - 20% level with
no escalation of costs in the context of long-term product pricing
estimate. The capital cost estimate was prepared by Worley Chile
S.A. and Worley Argentina S.A. (collectively, Worley) in
collaboration with Allkem. The estimate includes capital cost
estimation data developed and provided by Worley, Allkem, and
current estimates. The capital cost was broken into direct and
indirect costs. Direct costs encompass costs that can be directly
attributed to a specific direct facility, including the costs for
labour, equipment, and materials. This includes items such as plant
equipment, bulk materials, specialty contractor’s all-in costs for
labour, contractor direct costs, construction, materials, and
labour costs for facility construction or installation. Indirect
costs support the purchase and installation of the direct costs,
including temporary buildings and infrastructure; temporary roads,
manual labour training and testing; soil and other testing; survey,
engineering, procurement, construction, and project management
costs (EPCM); costs associated with insurance, travel,
accommodation, and overheads, third party consultants, Owner’s
costs, and contingency.-Quantity development was based on a
combination of: -Basic design (engineered conceptual
designs). -Estimates from plot plans, general arrangements or
previous experience, and order of magnitude allowances.-Estimate
pricing was derived from a combination of: -Current pricing
from Allkem’s ongoing Projects and operations at Olaroz Stage 2 and
Sal de Vida Stage 1. -Estimated or built-up rates and
allowances. -Reconfirmed pricing from relevant contractors
based on budget quantities and quotations. -Labour hourly
costs based on hourly labour costs built up to include labour
wages, statutory payroll additives, insurances, vacation, and
overtime provisions.-The estimate considers execution under an EPC
approach.-The construction working hours are based on 2:1 rotation
arrangement, i.e.: 14 (or 20) consecutive working days and 7 (or
10) days off. The regular working hours at 9.5 hours per day but
could be extended up to 12 hours of overtime. Whilst an agreement
will need to be reached with the relevant trade unions, this roster
cycle is allowed under Argentinian law and has been used for
similar projects. Labour at the wellfields, ponds, process plant,
and pipelines areas will be housed in construction camps, with camp
operation, maintenance, and catering included in the indirect cost
estimate. A productivity factor of 1.35 was estimated, considering
the Project/site-specific conditions.-Sustaining capital is based
on current requirements and considers some operational improvements
such as continuous pond harvesting.Engineering, management, and
Owner’s costs were developed from first principles. The Owner’s
cost estimate includes: -Home office costs and site
staffing, -Engineering and other sub-consultants,
-Office consumables, equipment, -Insurance,
-Exploration, -Pilot plant activities and associated project
travel.-The estimate for the engineering, management and Owner’s
costs was based on a preliminary staffing schedule for the
anticipated Project deliverables and Project schedule. Engineering
design of the estimate for the home office is based on calculation
of required deliverables and manning levels to complete the
Project.
- -The operating costs estimate for Cauchari was updated by
Worley (Chile) and reviewed by Allkem’s management team. The cost
estimate excludes indirect costs such as corporate costs, overhead,
management fees, marketing and sales, and other centralised
corporate services. The operating cost does also not include
royalties, and export taxes to the company.-Most of the costs are
based on labour and consumables which are in use at Olaroz
operation as a going concern.-Corporate tax rate is set at
35%.
- Commodity price is based on market studies conducted by
well-known international consultancy Wood McKenzie.
- Pricing for Cauchari transportation and port costs were based
on the current Olaroz operations due to the 20 km proximity of the
Projects. The estimate includes freight, handling, depot, and
customs clearance to deliver lithium carbonate either Freight on
Board (FOB) Angamos Chile or Campana in Argentina.
- Current Provincial Mining royalty is limited to 3% of the mine
head value of the extracted ore, calculated as the sales price less
direct cash costs related to exploitation and excluding fixed asset
depreciation. In addition, pursuant to Federal Argentine regulation
Decree Nr. 1060/20, an 4.5% export duty on the FOB price by a
mining company is to be paid when exporting lithium products.
- All estimates disclosed herein are expressed in US dollars.
Allkem uses US dollars as reporting currency in all statements and
reports. Allkem’s subsidiaries use US dollars as reporting currency
and operational currency. Argentine Peso is used as a transactional
currency for local payments within the country..
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Revenue factors |
- The derivation of, or assumptions made regarding revenue
factors including head grade, metal or commodity price(s) exchange
rates, transportation and treatment charges, penalties, net smelter
returns, etc.
- The derivation of assumptions made of metal or commodity
price(s), for the principal metals, minerals and co-products.
|
- The lithium concentration is forecast based on the groundwater
flow in the transport model. This predicts a minor decline in the
lithium concentration over time, 580 mg/l for years 1-5, 545 mg/l
for years 6-9 and 490 mg/l for years 9-31.
- Commodity prices are based on market forecasts by Wood
McKenzie. Transportation costs are based on known costs from Olaroz
operation.
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Market assessment |
- The demand, supply and stock situation for the particular
commodity, consumption trends and factors likely to affect supply
and demand into the future.
- A customer and competitor analysis along with the
identification of likely market windows for the product.
- Price and volume forecasts and the basis for these
forecasts.
- For industrial minerals the customer specification, testing and
acceptance requirements prior to a supply contract.
|
- Lithium is a commodity with a strong growth profile and
increasing demand. The growth trend is for compound annual growth
rate (CAGR) of 11% until 2033 supporting strong market dynamics
until at least 2033.
- Customer and competitor analysis has been conducted and the
company has a mixture of long and short term sales contracts in
place to benefit from this.
- The company expects to sell all of the combined stages with a
maximum production of 25,000 tpa of lithium carbonate through a
combination of long and short term contracts, based around
forecasts of price provided by industry consultants Wood
McKenzie.
- Allkem has established relationships with customers who
purchase product and Allkem provides test samples as needed for new
potential customers.
|
Economic |
- The inputs to the economic analysis to produce the net present
value (NPV) in the study, the source and confidence of these
economic inputs including estimated inflation, discount rate,
etc.
- NPV ranges and sensitivity to variations in the significant
assumptions and inputs.
|
- For the economic analysis, the Discounted Cash Flow (DCF)
method was adopted to estimate the project's return based on
expected future revenues, costs, and investments. DCF involves
discounting all future cash flows to their present value using a
discount rate determined by the company. This approach facilitates
critical business decisions, such as M&A activities, growth
project investments, optimizing investment portfolios, and ensuring
efficient capital allocation for the company.-Key points about the
Discounted Cash Flow method: -The discount rate is based on
the weighted average cost of capital (WACC), incorporating the rate
of return expected by shareholders. -All capital expenditures
that will be incurred as part of project development is considered
as sunk costs and excluded them from the present value
calculations.-The DCF approach involves estimating net annual free
cash flows by forecasting yearly revenues and deducting yearly cash
outflows, including operating costs (production and G&A costs),
initial and sustaining capital costs, taxes, and royalties. These
net cash flows are then discounted back to the valuation date using
a real, after-tax discount rate of 10%, reflecting Allkem's
estimated cost of capital. The model assumes that all cash flows
occur on December 31st, aligning with Allkem's Fiscal Year.The DCF
model is constructed on a real basis without escalation or
inflation of any inputs or variables. The primary outputs of the
analysis, on a 100% Project basis, include: -NPV at a
discount rate of 10%; -Internal rate of return (IRR), when
applicable; -Payback period, when applicable -Annual
earnings before interest, taxes, depreciation, and amortization
(EBITDA) -Annual free cash flow (FCF)
|
Social |
- The status of agreements with key stakeholders and matters
leading to social licence to operate.
|
- Allkem has been actively involved in community relations since
the properties were acquired by SAS prior to initial drilling on
the Project in 2011. Although there is minimal habitation in the
area of the Salar, Allkem has consulted extensively with the local
communities and employs members of these communities in the current
exploration activities.-The formal EIA permitting process will
address community and socio-economic issues; it is expected the
Project will have a positive impact with the creation of new
employment opportunities and investment in the region. As part of
the EIA, a comprehensive consultation was undertaken with members
of the local communities, regarding the Project development and its
associated opportunities for the community members.
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Other |
- To the extent relevant, the impact of the following on the
project and/or on the estimation and classification of the Ore
Reserves:
- Any identified material naturally occurring risks.
- The status of material legal agreements and marketing
arrangements.
- The status of governmental agreements and approvals critical to
the viability of the project, such as mineral tenement status, and
government and statutory approvals. There must be reasonable
grounds to expect that all necessary Government approvals will be
received within the timeframes anticipated in the Pre-Feasibility
or Feasibility study. Highlight and discuss the materiality of any
unresolved matter that is dependent on a third party on which
extraction of the reserve is contingent.
|
- The company has a number of material agreements, such as that
Lithium Americas Corp. and Ganfeng Lithium own the Minera Exar
Project through a 49/51 joint venture company, Minera Exar
S.A.
- Orocobre and SAS agreed to a joint venture with Advantage
Lithium Corp (AAL) in November 2016
- The company has an exploration work by AAL under joint venture
agreement with Orocobre, started in 2017.
- Orocobre merged with Galaxy Lithium to form Allkem Limited on
21 August 2021. Allkem indirectly owns 100% of the Cauchari
project.
- The Jujuy provincial government mining investment company
(JEMSE - 8.5%) is a shareholder in the project.
- Environmental baseline was submitted in 2019 and is under
evaluation by the provincial mining authority
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Classification |
- The basis for the classification of the Ore Reserves into
varying confidence categories.
- Whether the result appropriately reflects the Competent
Person’s view of the deposit.
- The proportion of Probable Ore Reserves that have been derived
from Measured Mineral Resources (if any).
|
- The Ore Reserves are classified as a both Proved and Probable.
Proved Ore Reserves are derived from the Measured Mineral Resources
in the NW wellfield area during the first 7 years of production.
Lithium Reserves derived after year 7 from the Measured and
Indicated Mineral Resources in the NW and SE wellfield areas were
categorized as Probable Ore Reserves
- Brine production initiates in Year 1 from wells located in the
NW Sector. In year 9, brine production switches across to the SE
Sector of the Project.
- In the view of the Competent Person, the Mineral Resource
classification is believed to adequately reflect the available data
and understanding of the hydrogeological setting. It is consistent
with the suggestions of Houston et. al., 2011 and the Best Practice
Guidelines prepared for the estimation of Mineral Resources and Ore
Reserves contained in brines for the JORC - The Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore
Reserves.
- Given that projected production wells were placed in Measured
Mineral Resource zones, a majority of the Probable Ore Reserves
(approximately 98%) have been derived from Measured Mineral
Resources. However, uncertainties in the modifying factors were
considered when classifying the Ore Reserves, namely model updates
which will be needed as mining progresses.
|
Audits or reviews |
- The results of any audits or reviews of Ore Reserve
estimates.
|
|
Discussion of relative accuracy/ confidence |
- Where appropriate a statement of the relative accuracy and
confidence level in the Ore Reserve estimate using an approach or
procedure deemed appropriate by the Competent Person. For example,
the application of statistical or geostatistical procedures to
quantify the relative accuracy of the reserve within stated
confidence limits, or, if such an approach is not deemed
appropriate, a qualitative discussion of the factors which could
affect the relative accuracy and confidence of the estimate.
- The statement should specify whether it relates to global or
local estimates, and, if local, state the relevant tonnages, which
should be relevant to technical and economic evaluation.
Documentation should include assumptions made and the procedures
used.
- Accuracy and confidence discussions should extend to specific
discussions of any applied Modifying Factors that may have a
material impact on Ore Reserve viability, or for which there are
remaining areas of uncertainty at the current study stage.
- It is recognised that this may not be possible or appropriate
in all circumstances. These statements of relative accuracy and
confidence of the estimate should be compared with production data,
where available.
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- Potential environmental effects of pumping have not been
comprehensively analysed at the PFS stage. Additional evaluation of
potential environmental effects will be done as part of the next
stage of evaluation.
- Additional hydrogeological test work will be required in the
next stage of evaluation to adequately verify the quantification of
hydraulic parameters in the Archibarca fan area and in the Lower
Sand unit as indicated by the sensitivity analysis carried out on
the model results.
- There is a reasonable prospect that through additional
hydrogeological test work Inferred Resources in the Lower Sand
Units will be converted to Measured and Indicated (M+I) Mineral
Resources.
- The described mining method is deemed adequate to support
economic brine extraction and is similar in configuration to other
lithium brine extraction configurations witnessed on operating
properties owned by Allkem.
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