DFS delivered, clearing the way for RECAPE, funding and FID
BUY – 17.6p (from 18.5p)
- The Company released the Barroso Lithium Project DFS and maiden mineral reserves last week.
- We update our valuation to account for latest operating/financial assumptions based on the DFS (more details in the note).
- As reminder, DFS highlights include:
o Conventional production flowsheet (ie lower execution risk) including open pit mining (contractor), DMS/flotation plant
o 14y / WO 5.2x / 1.47Mtpa plant / 1.0% Li2O / 70% rec / 183ktpa SC5.5
o Development Capex $323M (net of ~$95M State Grant) and Sustaining Capex $65M (net of ~$27M State Grant)
o Higher upfront capex accounts for tighter design parameters, inflation, EUR appreciation, key infrastructure as well as embedded expansion to 3Mtpa optionality (roads, power transformers, larger crushing/screening/conveyor units, plant footprint to accommodate an extra production line); expect potential expansion to be significantly value accretive on lower capital intensity and economies of scale; LOM extension and scale expansion permitting is also expected to be more straightforward than a start up of operations
o LOM rehabilitation/closure costs $237M reflecting comprehensive environmental provisions / low impact design (backfilling pits, revegetation, original topography restitution, water reservoirs dismantling, etc); most of the spend is back ended (post mine depletion)
o AISC (net By Products and Grant) $646/SC5.5 FOB (~$705/SC6E FOB), in 2nd quartile on global cost curve, incl rehabilitation/closure (part of AISC) ~$92/SC5.5 FOB
o Average lithium price $1,788/SC5.5 FOB (~$2,005/SC6E CIF)
o Post Tax NPV8 and IRR $913M and 43% respectively; 1.9y payback
- Maiden reserve – 20mt 0.99% Li2O 0.5Mt LCE; strong base to grow further – 12Mt still Inferred, 35-62Mt in Exploration Target (on top of 39Mt MRE).
- Focus shifts to RECAPE decision (1Q27) followed by project funding/FID, construction start (2027), production (2028/29); offtake/prepay discussions ongoing.
Conclusion: The Barroso DFS delivers strong economics (post tax NPV8 and IRR $913M and 43%) marking a major derisking event with the team advancing project funding discussions, on course for the RECAPE application, and FID. The study reiterates our strong conviction in Barroso – the largest EU based spodumene resource (+1Mt LCE MRE with strong growth and scale expansion potential), conventional flowsheet, strategic location (go to feed source for future EU based refining capacity and a potential M&A target), good infrastructure (renewables based power, roads, ports, accommodation), state backing (€110M grant/loan guarantees) and supportive shareholders (incl AMG strategic partnership). Reiterate BUY with ~US$940M NAV and 17.6p TP (from 18.5p).
*SP Angel acts as Nomad and Broker to Savannah Resources
Analysts
Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474
John Meyer –John.Meyer@spangel.co.uk – 0203 470 0490
Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484
Arthur Parish – Arthur.Parish@spangel.co.uk – 0203 470 0476
Sales
Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472
Abigail Wayne –Abigail.Wayne@spangel.co.uk – 0203 470 0534
Rob Rees –Rob.Rees@spangel.co.uk – 0203 470 0535
Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
Prince Frederick House
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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)
+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
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