Atlantic Lithium may be behind several of its African peers, but the best investments are worth the wait. And I only invest long-term.

Atlantic Lithium

Atlantic Lithium (LON: ALL) shares are the definition of volatility — spiking to 61.2p in April 2022 and falling to 23.11p today. The company has the rights to an exceptional lithium deposit, but in a volatile country — and has been accused by Blue Orca of impropriety regarding its acquisition of the Ewoyaa asset in Ghana.

Atlantic Lithium Ltd

But it’s partnered with titan Piedmont Lithium, and quality work is ongoing at the flagship — which will be the first lithium mine in Ghana — as recent results can attest.

Atlantic Lithium shares: quarterly activities

During Q2 2023, Atlantic Lithium announced the completion of its Definitive Feasibility Study for the Ewoyaa Project. The DFS strongly reaffirms the Project’s economic viability and exceptional profitability:

  1. Potential for a 2.7Mtpa steady state operation, producing 3.6Mt of spodumene concentrate over a 12-year Life of Mine (LOM)
  2. Post-tax NPV of $1.5bn
  3. Free cash flow of $2.4bn from LOM revenues of US$6.6bn
  4. Internal Rate of Return (IRR) of 105%
  5. Average LOM EBITDA of $316 million per annum
  6. Short payback period of just 19 months (they always say this, it’s usually a bit longer)
  7. Cash operating costs of $377/t of concentrate Free-On-Board (FOB) Ghana Port, after by-product credits
  8. All-in Sustaining Cost (AISC) of $610/t
  9. A$15.3 million in cash on hand.

The capex cost estimate for Ewoyaa is $185 million, with $127.5 million coming from Piedmont as part of the pre-existing, and heavily analysed, agreement. And encouragingly, the production target has been increased to 350,000tpa of spodumene concentrate, compared to the previous pre-feasibility study target of 255,000tpa.

These are big, big numbers, even if you compare them to the current titans.

The DFS also incorporates a Mineral Resource Estimate (MRE) of 35.3Mt @ 1.25 Li2O, Ore Reserves of 25.6Mt @ 1.22% Li2O, and LOM concentrate pricing of US$1,587/t, FOB Ghana Port.

Atlantic is now waiting for approval of the Mankessim license consolidation ahead of resubmission of the Mining Lease application for the Project. Moreover, DRA Global has been appointed to conduct a Scoping Study to assess the viability of an additional flotation circuit downstream to the proposed Dense Media Separation processing plant, with the outcome of this flotation circuit Scoping Study expected in Q4 2023.

Atlantic Lithium has also recently made several key executive appointments — with Keith Muller in as CEO, Len Kolff as Head of Business Development & Chief Geologist, and Aaron Maurer appointed as Head of Operational Readiness.

Management commentary

Executive Chairman Neil Herbert is an old hand in the mining space. Other than being a chartered accountant (much more valuable than many realise), he was also non-executive Chair at Premier African Minerals for a couple of years to April 2022. He was also Finance Director of UraMin between 2005 and 2007, before its sale to Areva for $2.5 billion — alongside founding director and MD Africa George Roach.

Executive Chairman Neil Herbert

Herbet enthuses that the DFS ‘represents a significant de-risking milestone and reaffirms Ewoyaa as a low capex and low opex project with impressive profitability potential…having only drilled 3% of the Company’s tenure in Ghana, there also remains significant value upside through exploration. As such, we continue to advance our drilling activities across Ewoyaa and the wider Cape Coast Lithium Portfolio.’

The Chair also notes that ‘Ewoyaa is one of the leading hard rock lithium assets globally. We are, therefore, driven to achieve our objective of near-term production in Ghana.’

Muller considers that ‘the plant has been designed to maximise metal recovery, enhancing NPV and generating robust margins over the life of the mine…deployment of a Modular DMS unit, processing 450,000t of ore while construction of the main plant gets underway, represents both a means of risk mitigation and a source of early revenue.’

With Piedmont funding 70% of the initial $185 million capex costs, ALL is actively considering financing the remaining share of its own construction and opex liability with a pre-payment deal rather than shareholders dilution — and given the delays at PREM’s Zulu, one would hope that ALL builds in clauses that cover for potential delays.

In fact, this strategy to copy PREM’s playbook — getting some revenue in through a smaller plant initially, and then building up to multiple plants through a much larger EPO.

Atlantic is some time away from getting spades into the ground, but there’s another 97% of the tenure to explore and a competent management team at the helm.

Time to average up.

Not advice.

This article has been prepared for information purposes only by Charles Archer. It does not constitute advice, and no party accepts any liability for either accuracy or for investing decisions made using the information provided.

Further, it is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Leave a comment

Your email address will not be published. Required fields are marked *