For Perth-based lithium chemical company Lepidico, the 2019 June-ending quarter has been a truly transformational period. In April, the firm announced that its pilot plant project for the production of lithium carbonate, using its patented L-Max® technology, had commenced the commissioning phase. This milestone was followed by three significant announcements on May 7th: First, Lepidico confirmed an-all share offer to acquire lithium company Desert Lion Energy Corp, listed on the TSXV. Then it announced a Memorandum of Understanding (MoU) with Abu Dhabi-based chemical manufacturer Gulf Fluor. Finally, Lepidico launched a rights issue to raise up to AUS$10.8 million in new shares. Factor in the company’s earlier pivot towards lithium hydroxide production, utilising its new LOH-Max™ process, and it is clear to see that Lepidico has undergone a significant metamorphosis since the beginning of 2019.
The successful commissioning of the pilot plant project in Western Australia, on-schedule and within budget, delivered a big boost to ASX-listed Lepidico, according to managing director Joe Walsh.
“It should give our shareholders and potential future stakeholders confidence that we can deliver on our development plans,” he says. “L-Max® is a new process and this is the first time that a plant using small scale industrial equipment has been built.”
The pilot project moved into the operational phase in May, with first concentrate being fed into the plant towards the end of the month, after which it will start to produce lithium carbonate and the various by-products from the L-Max® process, including sulphate of potash (SOP).
A new processing technology
Lepidico also plans to build LOH-Max™ lithium hydroxide capability into the plant later in 2019, also using industrial equipment.
“We intend to rapidly advance the process development for LOH-Max™ to demonstration scale. We’ve got the foundation plant infrastructure now to achieve this and thereby put LOH-Max™ process development onto a fast-track,” says Walsh.
Having closely followed the development of the lithium market over the last 12-18 months, it became apparent to Lepidico that preferences in the lithium chemicals supply chain were shifting towards hydroxide production over carbonate.
“When we evaluated projects that received final investment decisions and funding commitments in 2018, they were almost exclusively hydroxide projects. Furthermore, in various discussions with prospective customers, we were informed that there was a strong preference for hydroxide. These was factors that we couldn’t ignore.”
Taking into account the industry’s changing preferences, Lepidico consulted with its major shareholder Strategic Metallurgy to begin research and development work on a novel process to produce lithium hydroxide.
In parallel with this, Lepidico had also become aware of a fundamental risk to the project associated with the production of sodium sulphate as a by-product from its lithium carbonate process flowsheet.
After a risk review session, the company found that long term offtake for the highly soluble by-product may be hard to come by, given the increasing maturity of the global sodium sulphate market, which is mainly used in powdered detergents and pulp and paper manufacture.
“While we were looking for a hydroxide process, we were also keen to develop a process step for the back end of L-Max® that didn’t lead to the production of sodium sulphate. Those two components are what led to the development of the LOH-Max™ process.”
The LOH-Max™ process has been designed to treat a lithium sulphate intermediate product that is produced both from L-Max® and from the conventional conversion of spodumene concentrates. Therefore, LOH-Max™ has broad application within the lithium industry, being applicable to most hydrometallurgical conversion processes that employ sulphur–based chemistry.
During the March quarter, Strategic Metallurgy produced the first samples of lithium hydroxide using the proprietary LOH-Max™ process. Preliminary design work also indicated that considerable capital and operating cost savings may be realised, as the LOH-Max™ design had fewer process steps and less mechanical equipment than conventional processes.
Lepidico expects engineering work to commence in June, with a planned four-month schedule for its consultant Lycopodium to complete the required circuit engineering and integrate it into the Phase 1 plant design.
“We have set an aggressive but realistic timeline so we don’t impose too much of a delay on our planned development of the Phase 1 plant project,” says Walsh.
Becoming vertically integrated
Lepidico’s recently announced acquisition of Toronto–based Desert Lion Energy represents a major advancement for the company. The merger will create a vertically integrated lithium development company, from the mine all the way to chemical production.
The deal will give Lepidico direct ownership in Desert Lion’s lepidolite deposits and large exploration package in Namibia, in contrast to its position at the Alvarrões deposit in Portugal where Lepidico has access to lepidolite ore under an offtake agreement with the mine owner Grupo Mota.
According to investment research firm Edison Group, the merger will therefore de-risk Lepidico as an investment proposition from a strategic and operational perspective, since it will not be dependent on a single source of lepidolite supply.
“The Desert Lion deal gives us direct ownership in our own lepidolite deposit. Furthermore, it will give us an alternate feed source for the Phase 1 chemical plant and/or a feed source for a second plant. We are looking at building up a portfolio of assets to support our longer-term strategic growth objectives.”
These strategic growth objectives were underlined by the subsequent announcement that Lepidico had entered into a supply and marketing alliance with Abu Dhabi based chemical company Gulf Fluor for the supply of sulphuric acid and land for the construction and operation of its Phase 1 Plant Project.
Gulf Fluor operates a large industrial plant in the Industrial City of Abu Dhabi (ICAD) and is the largest producer of sulphuric acid – a critical reagent in the L-Max® process – in the region. In addition, the firm leases a large parcel of land in ICAD on which it is envisaged that Lepidico could build its Phase 1 plant project.
Lepidico stands to benefit from a number of operating advantages should it choose to locate its Phase 1 project in ICAD, including the fact that sulphuric acid can be piped directly to Lepidico’s plant.
“This is the first time we’ve had an opportunity to locate an L-Max® plant on the same site of an exisitng sulphuric acid plant. This negates the requirement for transport, logistics and handling of sulphuric acid, thereby reducing risk.
“ICAD is specifically designed for medium to heavy industry and the Gulf Fluor site has its own wharf. It’s got all the infrastructure and services that we need for our Phase 1 project.
“We also completed a study evaluating whether regional markets exist for our by-products. Given the level of construction and agricultural activity happening in the broader region, we identified that there are sizeable markets for both SOP fertiliser and amorphous silica, which can be used as a building material.”
ICAD also has a ‘plug and play’ approach towards new industrial developments, which means that the approvals and permitting process is expected to be able to be completed within three to four months.
Lepidico is currently working on an ICAD trade-off study that will fully evaluate the prospect of a plant development in Abu Dhabi. Until the study is completed in late 2019, Lepidico will continue to use the base-case scenario of locating the Phase 1 plant in Canada.
Therefore, the company’s ongoing evaluation of a plant development in Abu Dhabi, along with its incorporation of LOH-Max™ capabilities into the Phase 1 plant has meant that the final feasibility study for the plant is now due in the first half of 2020, at which point Lepidico will seek to finalise its offtake and financing agreements.
Finally, Lepidico undertook a renounceable rights offer to raise up to AUS$10.8 million which will go towards for the integration of Desert Lion into the business, the evaluation of Abu Dhabi into the feasibility study for the Phase 1 plant, the engineering of LOH-Max™ into the plant design, plus further resource development and exploration work.
This neatly encapsulates the intense transformation of Lepidico’s business during the first six months of 2019. It has pivoted towards lithium hydroxide production with the advent of a new processing technology, become a vertically integrated lithium company and taken the first steps to establishing its operations in an exciting, high growth potential location.