Cauchari Lithium Project Update: Increased Value and Expansion Potential

Allkem Limited (ASX: AKE) is thrilled to unveil significant updates regarding its Cauchari lithium brine project, situated in Argentina's Jujuy Province. The company has meticulously reviewed and revised crucial aspects of the project, including Mineral Resources, Ore Reserves, project economics, cost estimates, and the project timeline. These updates stem from a Technical Report released in October 2019, before Orocobre Limited's complete acquisition of Advantage Lithium Corporation in April 2020.

Key Highlights

Financial Metrics

• Increased Capacity: Allkem aims to achieve a lithium carbonate production capacity of 25,000 tonnes per annum.
• Enhanced NPV: The Pre-tax Net Present Value (NPV) has surged to an impressive US$2.52 billion, marking a substantial 200% increase from the previous study's US$0.84 billion at a 10% discount rate. The Post-tax NPV at a 10% discount rate stands at US$1.37 billion.
• Steady Cash Operating Margin: Despite the upward revision in realized price projections, the cash operating margin remains robust at approximately 85%. This strength balances the proportional increase in operating costs, which have risen from US$3,560 per tonne LCE to US$4,081 per tonne lithium carbonate equivalent (LCE). The cost escalation is attributed to significant hikes in the prices of soda ash, lime, natural gas, and employment expenses since the previous study.

Mineral Resource and Ore Reserve

• Resource Adjustment: The Total Mineral Resource Estimate now stands at 5.95 million tonnes (Mt) LCE, indicating a minor 6% decrease from the previous 2019 estimate due to slight alterations in mining parameters.
• Reserve Expansion: The Total Ore Reserve Estimate has seen an impressive 11% increase from the prior statement, totaling 1.13 Mt LCE. This supports a 30-year project lifespan based on Ore Reserves alone. The expansion is attributed to a redefined point of reference for Ore Reserve reporting, focusing on 'brine pumped to the evaporation ponds.'

Project Cost and Schedule Update

• Capital Cost Surge: The development capital cost estimate (CAPEX) has seen a substantial increase from US$446 million in the previous study to US$659 million for mechanical completion, marking a 48% rise.
• Project Milestones: The project is on track for substantial mechanical completion, pre-commissioning, and commissioning activities expected to take place by the first half of Calendar Year 2027 (H1 CY27). First production is anticipated in the second half of Calendar Year 2027 (H2 CY27), with a one-year ramp-up phase.

Martin Perez de Solay, Managing Director and Chief Executive Officer of Allkem, expressed his thoughts on the updated study results, emphasizing the standalone value of the Cauchari Project. He also highlighted the potential to integrate this asset into the Olaroz complex, foreseeing opportunities to reduce capital and operating costs, which are currently under exploration as part of Olaroz Stage 3 expansion studies.

These developments underline the strategic significance of the Cauchari lithium brine project, both in terms of its current value and its potential role in Allkem's broader expansion plans. Investors and industry observers will be keen to monitor the project's progress and its impact on the lithium market.

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