PEA Highlights Shaakichiuwaanaan Project as a Potential North American Lithium Raw Materials Supply Base

Press Release

August 21, 2024

The Preliminary Economic Assessment (PEA) referred to in this announcement is a preliminary technical, conceptual and economic study of the potential viability of developing the Shaakichiuwaanaan Project by constructing a concentrate processing facility on site. The PEA referred to in this announcement is conceptual, at scoping study level only, which is based on a lower level of technical assessment that is not sufficient to support the estimation of mineral reserves and is inherently uncertain. The PEA has an accuracy of ± 25-30% only to determine potential viability. It does not have the same level of detail, precision and confidence to determine technical and economic viability as a pre-feasibility study (PFS) or definitive feasibility study (FS). Further exploration and evaluation work and appropriate studies are required before the Company will be in a position to estimate any mineral reserves or to provide any assurance of an economic development case.

Approximately 75% of the Life of Mine production is in the Indicated Mineral Resource category and 25% is in the Inferred Mineral Resource Category. The use of Inferred Mineral Resources in the PEA is not the determining factor in the viability of the Shaakichiuwaanaan Project. The Inferred Mineral Resource is considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorised as mineral reserves and is not the determining factor in the viability of the Shaakichiuwaanaan Project. Inferred Mineral Resources are that part of the mineral resource for which quantity and grade, or quality are estimated on the basis of limited geologic evidence and sampling, which is sufficient to imply but not verify grade or quality continuity. Inferred Mineral Resources may therefore not be converted to mineral reserves. Whilst both the CIM Code and JORC Code provide that it is reasonably expected, though not guaranteed, that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration, in accordance with ASX Listing Rule 5.16.4, there is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the production target in the PEA will be realized. Accordingly, there is no certainty that the PEA or its conclusions will be realised.

The PEA is based on the material assumptions outlined elsewhere in this announcement. These include pricing assumptions and assumptions about the availability of funding including the availability of tax credits under CTM-ITC and cash flow from Stage 1 operations which are not guaranteed. While the Company considers all the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the PEA will be achieved.

Highlights

• Preliminary Economic Assessment (PEA) completed by independent consultants, BBA and Primero, outlining a preliminary base case scenario for a staged development of the cornerstone CV5 Spodumene Pegmatite, via both open pit and underground mining methods.
• High-grade Nova Zone[1] (including 21.8 million tonnes at 1% Li₂O of which 93% is Indicated, 7% is Inferred Resource category respectively) to be targeted and prioritised via underground mining methods, allowing direct access to higher grade material and minimizing the environmental footprint.
• At the targeted Stage 2 production rate of ~800 ktpa[2] spodumene concentrate, this would potentially position Patriot as the 4^th largest spodumene concentrate producer globally[3].
• Potential pre-tax net present value (“NPV”)_8% of $4.7 billion (US$3.6 billion) and after-tax NPV_8% of $2.9 billion (US$2.2 billion) with a pre-tax internal rate of return (“IRR”) of 38% (after-tax IRR of 34%) at US$1,375 per tonne (SC5.5, FOB Bécancour basis).
• Payback period of 3.6 years at an assumed average lithium price of US$1,375 per tonne (SC5.5, FOB Bécancour basis) or US$1,500 per tonne (SC6, FOB Bécancour basis), with life of mine (“LOM”) of up to 24 years.
• Targeting to become a North American top-tier, lower cost producer with an estimated average LOM cash operating cost[4] at site of $510 per tonne (US$387) and total cash operating cost free-on-board (“FOB” Bécancour)[5] of $736 per tonne (US$560)[6].
• An estimated break-even SC6 price (on a fully ramped 800 ktpa, EBITDA, FOB Bécancour basis) of US$587/t highlights the potentially viable nature of the Shaakichiuwaanaan Project throughout the lithium price cycle.
• Estimated to indicatively generate approximately $8.3 billion in Project Cash Flow (unlevered)over LOM.
• Average annual EBITDA[7] anticipated to be in the order of $850M and annual FCF[8] of $515M at an assumed spodumene price of US$1,375 per tonne (SC5.5, FOB Bécancour basis).
• Phased development strategy with anticipated Stage 1 capital expenditure estimate of $761M (US$579M) for the first 400 ktpa capacity including contingency and Net Capex of $640M (US$487M) leveraging the proposed 30% Canadian Clean Technology Manufacturing – Investment Tax Credit (“CTM-ITC”)[9].
• Estimated Stage 2 expansion Capex of $504M (US$383M) including contingency and Net Capex of $408M (US$310M) leveraging the proposed CTM-ITC, to reach a production capacity of ~800 ktpa of spodumene concentrate per year.
• The combined net cost[10] to reach nameplate production for both Stage 1 and Stage 2 is estimated to be approximately $608M (US$462M) taking into account funding that could come from both cash flows from Stage 1 and proposed CMT-ITC tax credits.
• Process plant feed rate following Stage 2 expansion at an average of ~4.5 Mtpa[11] via simple DMS-only process; average LOM lithia recovery of 69.5%; spodumene concentrate grade at 5.5% Li₂
• Access to existing, high quality transportation infrastructure with potential future improvements in the region combined with a low-carbon footprint, low cost and mainly renewable electricity source.
• Tier 1, stable mining jurisdiction of Eeyou Istchee James Bay region of Québec (under modern land claims agreement – James Bay Northern Quebec Agreement “JBNQA”) combined with a strong relationship with the Cree Nation of Chisasibi, Cree Nation Government and all stakeholders.
• The Eeyou Istchee James Bay region’s unique Examination Committee “COMEX” permitting process, with its well-defined guidelines, ensures a structured and clear path to project approval, fostering strong community and stakeholder engagement.
• Significant opportunities to enhance returns through further resource expansion, optimized mining to further prioritise access to the high-grade Nova Zone earlier and additional cost-saving measures indicate transformative potential.
• The Company will consider progressing a Feasibility Study, which among other options may include a trade-off study for a smaller high-grade focused development scenario, to optimise the project in the event of a lower price environment.
• The Project remains on track with FID targeted in CY27, indicatively paving the way for the construction to progress through CY28 and first production commencing in early CY29.

Management Comment

Ken Brinsden, President, CEO, & Managing Director for the Company, said: “Although studies are still at an early stage the potential outcomes of the PEA for the Shaakichiuwaanaan Project highlights the opportunity for Patriot Battery Metals to become a global lithium leader and a key supplier of lithium raw materials to the emerging North American and European battery materials supply chain.

“The PEA outlines a staged development pathway for Shaakichiuwaanaan, commencing with an initial 400 ktpa production capacity which is intended to allow us to leverage the key competitive advantages of this world-class deposit to provide lithium raw materials in emerging western markets.

“Importantly, the resources to be mined include a high-grade component in the Nova Zone that creates an opportunity for a potentially resilient project, while also giving us considerable flexibility in terms of how we progress Shaakichiuwaanaan. This flexibility and scalability could allow us to adapt nimbly to evolving market conditions, while continuing to grow the resource base.

“As we consider moving to the Feasibility Study stage, the Project’s anticipated low operating costs and expected IRA-compliant high-quality lithium product could make us an ideal partner for downstream players, making this a highly strategic asset in the future lithium landscape. There is also strong inbound interest from strategic partners to support Stage 1 funding, alongside potential access to Government funding mechanisms.

“The Shaakichiuwaanaan Project is potentially well positioned to anchor the North American lithium supply chain, meeting demand for decades to come, in the process targeting significant returns for all our stakeholders while maintaining a strong emphasis on sustainability and limited environmental impact,” Mr. Brinsden added.

Read More:

IBF4