The company today released the DFS into the 2 million tonne per annum base case development, as well as a prefeasibility study into a future doubling of capacity – both with positive results.

Under the base case, Pilgangoora has a post-tax net present value of $A709 million, at a 10% discount rate, up from $407 million in the March PFS, with a 2.7-year payback period and internal rate of return of 38.1%.

Thanks to a major reserve upgrade earlier this year, the life of mine has more than doubled to 36 years from 15 years.

Average annual production over the LOM is set to be 314,000 tonnes of 6% spodumene concentrate (or 44,000tpa lithium carbonate) and 321,000 pounds of tantalite at cash operating costs of $US196 per tonne CFR in the first 15 years, and $207/t over the life of the mine.

The PFS into a 4Mtpa expansion showed the project could produce 564,000tpa of 6% spodumene concentrate and 579,000lb tantalite, reducing LOM costs to $180/t CFR after tantalite by-product credits.

Capital costs have increased marginally to $214 million from $184 million, mainly due to an upfront investment to allow the later expansion to 4Mpta and support improved metal recoveries.

Capex to move to 4Mtpa would be $128 million.

Using consensus pricing, the 2Mtpa project is expected to deliver LOM revenue of $9.23 billion and earnings before interest, tax, depreciation and amortisation of $4.22 billion.

Increased production of 4Mtpa would more than double annual EBITDA, and increase the NPV to $1.16 billion.

Pilbara managing director and CEO Ken Brinsden said the DFS showed improvement over the March PFS, with the benefit of more accurate capital and operating costs.

“What stands out from the vast amount of work that has been completed as part of the DFS is the exceptional technical, economic and financial fundamentals of the Pilgangoora project – which is without doubt the world’s leading lithium development project, characterised by the scale, grade and quality of the resource, its low forecast operating costs and its scalability,” he said.

Completion of the DFS allows the company to move to the financing stage and remain on track to begin construction in the December quarter.

At the same time, the company will continue investigations into the 4Mtpa expansion.

Brinsden said the PFS had delivered compelling results, but the project would start production late next year at 2Mtpa to ensure an “orderly entry” of the Pilgangoora product to market.
 
 “However, we are confident that the growth in the market is such that we should be able to fast-track the expansion option after further engineering studies and market analysis,” he said.

“We will now further assess this opportunity, which would position us to fully capitalise on the outstanding market opportunity for lithium, underpinned by the transformational growth in the use of lithium-ion batteries which is occurring across the world.”

Foster Stockbroking analyst Mark Fichera said today’s announcements were a twofold positive.

“First, it both increases confidence and de-risks the core 2Mtpa Pilgangoora project,” he said. 

“Secondly, the 4Mtpa expansion case highlights how Pilbara can successfully exploit Pilgangoora should bullish lithium demand forecasts pan out.”

Foster has a buy rating for Pilbara with a 78c price target, which will be reviewed in light of today’s news.

Pilbara shares rose to as high as 59c, but last traded 2.8% higher at 55.5c.