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Lithium carbonate jumped to a new record last Friday (September 16), reaching 500,500 yuan per ton (or $71,300 per ton) as the commodity has now tripled in price over the past year. This all comes as demand for EVs continues to explode; the most recent estimates from the China Passenger Car Association are for EV car sales in China (the world’s largest EV market) to reach 6.0M vehicles, double that of the 3.0M sold last year. Lithium miners (and those mining for other battery metals) along with developers have done relatively well over the past few years:
In light of the strong demand backdrop, supply has been slow to ramp up to meet the current and projected demand. Some of the more important, near-term projects currently in the works (each with operating pilot plants) will be coming out of Nevada. Notable projects include Lithium America’s (LAC) Thacker Pass, Ioneer’s Rhyolite Ridge and today’s highlight – Cypress Development’s (CYP.V) Clayton Valley project. Cypress Development had a strong showing today (September 19) following the release that it had achieved the production of 99.94% lithium carbonate (Li2CO3) made entirely from the lithium bearing claystone from the wholly owned Clayton Valley Lithium project. This lithium carbonate was derived from the intermediate concentrated lithium solution produced at Cypress’ Lithium Extraction Pilot Plant Facility, located nearby in the Amargosa Valley. The high purity assays validate the extraction process designed specifically for the project. Note that the assay purity of 99.94% (three nines) exceeds the industry standards for battery grade lithium carbonate.
For context, the Clayton Valley lithium project is located near Albemarle’s (ALB) Silver Peak brine operation in Nevada. Metallurgical testing at Clayton Valley indicates that low-cost processing can be achieved by leaching with low acid consumption (126 kg/t) and high lithium recovery over 85%. Self-generated power from a 2,500 tpd sulfuric acid plant is included in the project’s Prefeasibility study costs. Pre-Feasibility Study highlights have illustrated a 15,000 tpd operation producing 27,400 lithium carbonate equivalent (LCE) annually, over a 40 year LOM. The capital estimate amounted to $493M with an operating cost estimate averaging $3,387 per tonne. That said, the project's after-tax NPV8% was estimated at $1.03B with a 25.8% IRR. A full Feasibility Study is expected to be released in the months ahead. Note that the Clayton Valley project site is located just a few kilometers to the northwest of the Amargosa Valley pilot plant. In the nearer term expect work to continue on the Feasibility Study along with the ongoing permitting work for both large scale lithium extraction and tailings facilities. An updated resource model is also now expected. The last corporate financing was an oversubscribed offering in February 2022 for $18.1M (9.058M units at $2.00 per unit). Due to the turmoil following the February 23rd Russian invasion of Ukraine, the shares took a sharp dive post financing.
All that said, since the start of July, there has been a sharp divergence between developers such as Piedmont Lithium (PLL) advancing by +67% and Lithium Americas advancing by +42%, in contrast to Cypress Development advancing by a mere +5% in the same timeframe (prior to today’s release). Part of the divergence can be attributed to size given that LAC and PLL are considerably larger companies and closer to commercial production. Moreover, we may yet still be in a risk-off environment. Regardless though, the widening discrepancy is worth highlighting.
We believe that given the on-going pricing strength in the lithium markets, today’s release will go a long way to providing a floor (in the very least) Cypress Development's the stock price. The company currently maintains $34M in treasury.
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