- Francisco Basin scoping study released
- Laguna Verde due to start pre-feasibility study early 2024
CleanTech Lithium (CTL:49p), a lithium company in Chile, has released the results of a recently completed scoping study at its second major lithium project in Chile, Francisco Basin.
Based on annual production of 20,000 tonnes of battery-grade lithium carbonate, the $450mn (£369mn) capital expenditure project is expected to generate cumulative net cash flows of $2.5bn over a production life of 12 years. The forecasts are based on the current Joint Ore Reserve Committee (JORC) resource estimate of 0.92mn tonnes of lithium carbonate equivalent (LCE) at a grade of 207mg/lithium. CleanTech will start a drilling programme at Francisco Basin in the final quarter of 2023, the results of which should enable it to extend the production life and enhance the project’s economic returns.
The scoping study also highlighted a 31-month payback period of the capital expenditure based on a long-term lithium carbonate equivalent (LCE) price of $22,500 per tonne. Even after a 45 per cent decline in the LCE price since mid-July 2023, the current spot price of $23,200 per tonne is still more than six times higher than the project’s operating cost of £3,641 per tonne, highlighting the hefty ‘margin of safety’. Indeed, the project's post-tax net present value (NPV) of $1.1bn (based on an 8 per cent discount rate) generates an internal rate of return of 43 per cent on capital invested. Even assuming a 10 per cent discount rate, the post-tax NPV is still $0.89bn. Expect further positive newsflow in the coming months when a direct lithium extraction (DLE) pilot plant comes on stream with the intention of producing one tonne of LCE per month.
Progress at Laguna Verde project
Moreover, Francisco Basin is located within 100km of the group’s more advanced Laguna Verde project. In July 2023, Laguna Verde announced a 20 per cent increase in its JORC-compliant resource of 1.8mn tonnes of LCE, of which 63 per cent is in the all-important measured and indicated category. Laguna Verde is due to commence a pre-feasibility study in early 2024, thus enabling CleanTech to enter substantive discussions on strategic partners, offtake arrangements and financing to further progress the project. By the year-end, the group will have invested $20mn (£16.3mn) in progressing both projects since the start of 2022. They now have a combined NPV of $3bn.
Admittedly, the shares have been volatile since I included them in my 2023 Bargain Shares Portfolio, and have pulled back to around the level of my last article (‘Take advantage of profit taking at this lithium stock’, 24 August 2023). This is more a reflection of weakness in the LCE price rather than the operational progress CleanTech is delivering.
The anomaly between CleanTech’s modest market capitalisation of £51.6mn and the value embedded in its two flagship projects is still worth exploiting as this battery metal play has the potential to deliver a return of several times the current share price. Buy.
■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com at £16.95 each plus P&P of £3.75, or £25 plus P&P of £5.75 for both books.
