- Prospect Resources (PSC) has managed to position itself as the only company to produce low iron spodumene and ultralow iron petalite concentrates
- Petalite is an in-demand commodity due and it’s primarily used in the production of glass and ceramics
- While spodumene can be used in the production of battery packs in electrical vehicles and for use in portable electronic devices (PED)
- Prospect owns 87 per cent of the Arcadia Project, which is Africa’s most advanced lithium project and houses both concentrates
- The company recently signed a seven-year offtake agreement with leading industrial minerals company Sibelco
- It’s also secured funding by appointing Afreximbank to arrange and syndicate a US$143 million project finance debt facility
- Shares in Prospect Resources are trading for 16.5 cents each
Dual ASX & FRA listed Prospect Resources (PSC) is in the enviable position of being one of the world leaders of petalite — an in-demand mineral which has uses across the glass, ceramics and electric vehicle markets.
The company’s majority-owned Arcadia Project in Zimbabwe is regarded as a globally unique deposit, which can produce both ultralow iron petalite concentrate and low iron spodumene concentrate.
Arcadia is also at the exciting stage of being shovel-ready with a seven-year offtake agreement already in place, making the entire project primed for production.
Combined with a potential US$143 million debt facility (around A$199.15 million) for Arcadia, Prospect stands ready to take advantage of the growing lithium demand and petalite’s unique properties.
Why petalite?
Petalite is a lithium aluminium silicate mineral, which is considered valuable as its an insoluble form of lithium. It’s also prized for being able to withstand temperatures of up 700 degrees without losing shape, making it perfect for the glass and ceramic industries.
While spodumene, a similar mineral found alongside petalite in lithium-rich granite pegmatites, can similarly be used in glass manufacturing.
It also has value in the electric vehicle industry, as lithium hydroxide can be processed from spodumene, which is needed for the lithium-ion batteries at the heart of almost all EVs.
This is significant as the global demand for electric vehicles is on track to explode, as evidenced by the Californian Government’s recent decision to ban the sale of all gas-powered cars by 2035.
By July this year, EV’s made up 18 per cent of all car sales in Europe alone, with the global market for electric cars expected to total a staggering $802 billion by 2027.
Currently, electric vehicle sales equate to approximately 3 per cent of all passenger vehicle sales globally, but that number is again tipped to grow significantly.
The growth will be spurred on by EV’s reaching cost parity with internal combustion vehicles — as the economies of scale in lithium batteries push down the cost of the cars.
EV leader Tesla even announced recently at its Battery Day 2020 event that it plans to halve the cost per kilowatt-hours of batteries, allowing it to start selling a vehicle with an entry point price of US$25,000 (around A$35,000).
Arcadia explained
With two in-demand products, attention has now turned to commencing production at Prospect’s flagship Arcadia Lithium Project, which is located around 38 kilometres outside of Zimbabwe’s capital city.
The project has an ore reserve estimate of 37.4 million tonnes a 1.22 per cent lithium oxide and 21 parts per million tantalum pentoxide. It also has a high-grade zone mineral resource estimate of 43.2 million tonnes at 1.41 per cent lithium oxide and 119 parts per million tantalum pentoxide — with a 1 per cent lithium oxide cut-off.
A recent definitive feasibility study looking at the economics of the Arcadia project also estimated it has a 15-and-a half year mine life if it was open pit. Across the life of the mine, the project is expected to bring in around US$3.42 billion (around A$4.84 billion) in revenue with an internal rate of return of 71 per cent.
Prospect has already signed up a number of offtake partners, including Sinomine Resource Group, which recently started construction to expand its battery grade lithium hydroxide plant, located in the Jiangxi Province of China.
PSC has also signed leading industrial minerals company Sibelco as an offtake partner for its petalite product. The privately owned family business generates revenues over €3.5 billion (approximately A$5.79 billion) and has 174 production sites operating in more than 30 countries.
The seven-year offtake agreement signed by Prospect and Sibelco not only locks in guaranteed offtake of 700,000 dmt per annum of high quality, ultra-low iron petalite, it also gives PSC access to the global businesses huge customer base, with end customer sales tied into the contract.
Future deals
The company has additionally fielded interest from leading clean energy company Uranium One, who last year expressed interest in becoming an offtake partner and even snapping up a stake in the company.
With the unique global deposit secured, an offtake agreement in place and all necessary permits obtained – Prospect has managed to get the Arcadia project to a stage where it is shovel-ready and merely awaiting finance.
The company isn’t looking at a long wait, considering it already signed up the African Export-Import Bank Afreximbank to facilitate funding for its flagship project. Afreximbank has agreed to organise and manage the primary syndicate, which will raise a total of US$143m (around A$199.15 million) project finance debt and also chip in US$75 million of its own funds.
At this stage, due diligence is still being carried out by Afreximbank as they work to progress securing the necessary funding to get Arcadia up and running. Prospect Resources Managing Director Sam Hosack said the growing demand for lithium will help speed-up the process.
“Many in the industry are calling the lithium market bottom, with demand and prices in China increasing over the past few weeks. We expect the prices to continue to strengthen over late 2020 and see more material price rises in 2021 as the supply shortage emerges,” he said.
“Tesla’s battery day and recent offtake agreements demonstrate that car manufacturers are rushing to secure lithium supply. Prospect is well-positioned as a potential near term low cost and sizeable producer, to deliver sustainably sourced lithium to its offtake partners and the broader market,” he added.
“This rising market is set to be in full swing when Prospect is targeting to commence production. We’re excited for the next 12 months ahead, having now secured Sibelco and progressing with Uranium One and Afreximbank,” he concluded.
Shares in Prospect Resources are currently trading for 16 cents each.