Critical Elements

Developing a project in Québec – the premier lithium district of the Western world



During the last 18 months Critical Elements has been ticking off major items on its list of deliverables in routine fashion. The TSX-V listed company is progressing the Rose Lithium-Tantalum project located in James Bay, Québec – a premier mining jurisdiction and a major global lithium hub. Last year, Critical Elements completed pilot plant work for its spodumene production facility before announcing results from its lithium carbonate conversion plant pilot study in May. By mid-2017 the company had submitted an environmental impact study (EIS) for the Rose project, but perhaps the biggest development thus far was the publishing of a feasibility study. The feasibility outlined a string of attractive metrics which is imbuing the company with an additional layer of confidence as it approaches the business end of the project.


The study indicated that the Rose project will produce an average annual production of 186,327 tonnes of chemical grade lithium concentrate and 50,205 tonnes of technical grade lithium concentrate, along with 429 tonnes of tantalum concentrate on an average annual basis over a 17-year mine life.


At the time, president Dr Steffen Haber said the feasibility was a ‘major milestone’ for Critical Elements and when RGN caught up with him, he reiterated the company’s satisfaction with the results.


“In combination with the piloting results preceding the feasibility, the superior quality of the ore has been confirmed and demonstrated by the results,” he declares.


The detailed study also included an economic analysis which estimated an initial capital cost of C$341 million including all infrastructures, with sustaining capital valued at C$126.8 million over the life of mine.


Finally, the project’s NPV was calculated at C$726 million (after-tax) with a superior IRR of 34.9% on price assumptions of US$1,500 per tonne technical grade lithium concentrate, US$750 per tonne chemical grade lithium concentrate and US$130 per kg tantalum pentoxide.


Overall the figures outlined in the feasibility are highly encouraging for Critical Elements and provide the company with a degree of clarity as it seeks project financing for the first phase of the Rose project.


Two-phased approach


The company is following a two-phased approach, whereby Phase 1 will produce technical grade spodumene for customers in the glass and ceramics industries across several global markets including Europe, the US and China. Chemical grade spodumene will also be produced in the first phase, before being shipped to China where it will be converted into lithium carbonate.


In terms of the timeline for Phase 1 of the project, Critical Elements is moving substantially towards detailed engineering, and expects to complete this process and finalise permitting by year end before commencing construction at the start of 2019.


“That means by the end of 2019 or the beginning of 2020, we will start the commissioning of the plant and then the idea is to commence selling the product in mid-2020,” Haber outlines.


Phase 1 of the Rose project is set to push Critical Elements into a cash flow generative position ahead of Phase 2, which will mark the company’s entrance into the lithium chemical producing space.


Critical Elements will construct a lithium carbonate processing plant during Phase 2 of the project in preparation to supply the major growth sector that is the lithium-ion battery market, and has been buoyed by the results of the lithium carbonate pilot study it conducted last year.


Using the well-known thermal leaching process, Critical Elements was able to easily convert spodumene material into lithium carbonate of battery quality and at a purity reading of 99.9%, while the impurity profile of the lithium chemicals was labelled ‘outstanding’ by the company in the news release.


“We are very encouraged by the results of the piloting work because again it demonstrates the superior quality of our ore, given that the process delivered such high yields and high recovery rates.”


Over the coming months, Critical Elements will begin working on a feasibility study for Phase 2 which is scheduled to take roughly nine months, After this is completed, the company will move into detailed engineering on that stage of the project.


“The carbonate plant presents a much bigger challenge to us compared to the spodumene plant, therefore we foresee the start up of the carbonate plant in 2023,” reveals Haber.


Timing the market


In fact, multiple projections from leading research bodies and firms within the lithium sector have flagged the early to mid-2020s as a critical period during which demand for battery grade lithium chemicals will skyrocket, based on predictions about EV take-up around the world.


With these projections in mind, Haber is adamant that the company’s Phase 2 plant will arrive into the market with impeccable timing during this transformative period in the global lithium industry.


In recent years a supply deficit has emerged in the lithium space, but with new hard rock producers slowly coming online Critical Elements sees the market balancing in the early 2020s, after which it will be close to offering its own supply of lithium carbonate to a global market which could have a depth of demand in the region of 450,000 tonnes in 2023.


Beyond 2023, some estimations are putting lithium carbonate demand at close to 1 million tonnes per year, therefore any lithium sources of a similar scale to the Rose project are going to be vital for the industry to keep up with spiralling demand.


“With the quality [outlined in the feasibility], we will have a very good position in supplying material into that market and that’s what we are also seeing in terms of potential strategic partners.


“The overall supply chain of the battery industry is already very interested to learn more about new supply coming onstream in that time frame, and they are getting more and more nervous about the potential supply of the existing players.”


The lithium hub of the West


Returning to the Rose project, being located in Québec offers a multitude of advantages for Critical Elements. Québec has been widely hailed as the hub for lithium production in the Western hemisphere and with a deeply ingrained mining community going back several generations, the company has access to a specialised labour force and all the necessary infrastructure for a mining project.


“A hydroelectric power line runs directly across our deposit and we are very close to a main road which is very well maintained and highly accessible for trucks.


“In terms of the population, you have the Cree nations in the vicinity who provide a lot of services to the mining industry and today there is a substantial amount of people available to us that have been educated in the ways of working in a mine.”


The company recently announced it had reached and agreement with the Cree Nation of Eastmain and Niskamoon Corporation for a spawning ground enhancement project at Lake Sturgeon near the James Bay highway. It is this sort of positive engagement with the local communities that Haber views as vital in terms of leaving a positive legacy in the region that has been so generous to them.


Beyond the advantages of working in the province of Québec, Critical Elements is also pleased to be working in a country with such an accommodating attitude to mining developments as Canada, which has clear rules and procedures and was recently voted the world’s top mining destination by the Fraser Institute.


Now as it looks to secure funding for its upcoming move into detailed engineering on the first phase of the Rose project, Critical Elements has appointed former CFO of Rockwood Lithium Marcus Brune to the board.


“I am very pleased that Marcus has joined the team,” says Haber, who worked closely with him at Rockwood. “He is an expert in strategy and corporate finance and he is helping us a lot in structuring the next financial steps to be taken.”


The next key deliverable for Critical Elements is to secure C$20-30 million in equity to help execute its plans for Phase 1 of the Rose project, which will be followed by Phase 2 when the company will enter the lithium carbonate production business in 2023.


With several potential strategic partners interested in working with the company, Critical Elements appears extremely well placed to start its ascent into the heart of the global lithium sector.