Category Archives: General

NEWS: Standard Lithium Announces Positive Preliminary Economic Assessment and Upgrading of Mineral Resource at Its Southern Arkansas Lithium Brine Project

Standard Lithium Ltd. (“Standard Lithium” or the “Company”) (TSXV: SLL) (OTCQX: STLHF) (FRA: S5L), is pleased to announce the results of a Preliminary Economic Assessment (PEA) of its 150,000 acre project in the south-central region of Arkansas, USA (the “Property”).  The PEA considers the production of battery-quality lithium carbonate through a phased build-out to a total 20,900 tonnes per annum (tpa) from the contemplated joint venture with Lanxess Corp. (see press release dated November 12, 2018) at their three-operating bromine-processing plants.  The PEA also includes the reclassification of the existing mineral resource to an Indicated category.  The PEA was prepared by Advisian, the consulting arm of WorleyParsons Canada Services Ltd (Worley), a world-leading integrated engineering firm with extensive experience in the design and construction of chemical plants and lithium brine processing projects around the globe.

Key Points:

  • Pre-tax US$1.3 Billion NPV at 8% discount rate and IRR of 42%;
    Total CAPEX estimate of US$437 Million including 25% contingency of both direct and indirect capital costs, completed in accordance with American Association of Cost Engineers (AACE) International Class 5 standard for estimates in process industries;
  • 25 year mine-life producing 20,900 tpa battery-quality lithium carbonate when all three plants are operational (production ramped up to full capacity over 5 years);
  • Non-optimised reagent cost per tonne lithium carbonate of US$3,107
  • All-in operating costs, including all direct and indirect costs, sustaining capital, insurance and mine-closure costs of US$4,319 per tonne of lithium carbonate; and
  • Lanxess resource upgraded to 3,140,000 tonnes Lithium Carbonate Equivalent (LCE) at the Indicated Category.

Dr. Andy Robinson, President and COO of Standard Lithium commented “We are delighted that we have been able, through close partnerships and access to large amounts of data, to bring our Lanxess project to the stage of successful completion of the PEA in such a short period of time.  We were able to provide to Worley a huge amount of process testing and actual operational data from the current brine-processing plants in southern Arkansas, and as a result, we feel that we have produced a realistic view of the potential there, as well as a picture of the robustness of the project.  We are progressing the deployment of the demonstration plant, and are scheduled to have it deployed to the project site in southern Arkansas in Q3 of this year.  Real-world process optimisation from the demonstration plant, combined with the advanced nature of this PEA, mean that we are well positioned to release a robust feasibility study in early 2020.

PEA Highlights:

UnitsValues
Productiontpa20,900[1]
Plant Operationyears25[2]
Total Capital Cost (CAPEX)US$437,162,000[3]
Operating Cost (OPEX)US$/yr90,259,000[4]
Average Selling PriceUS$/t13,550[5]
Annual RevenueUS$283,195,000
Discount Rate%
Net Present Value (NPV) Pre-TaxUS$1,304,766,000
Net Present Value (NPV) Post-TaxUS$989,432,000
Internal Rate of Return (IRR) Pre-Tax %41.8
Internal Rate of Return (IRR) Post-Tax%36.0

Notes:
All model outputs are expressed on a 100% project ownership basis
[1] Total production, using existing brine supply rates at the completion of Phase 3
[2] Plant operation commences upon completion of Phase 1
[3] Includes 25% contingency of both direct and indirect capital costs
[4] Includes all operating expenditures, including sustaining capital and allowance for mine closure
[5] Selling prices ranging between US$10,840-16,260/tonne were modelled as part of sensitivity analysis

Capital Costs
The project is envisaged to be implemented in three stages, corresponding with build-out at the existing brine processing facilities.  At full build-out, with estimated production of 20,900 tpa of lithium carbonate, the direct capital costs are estimated at US$204 Million, with indirect costs of US$146 Million.  A contingency of 25% was applied to both direct and indirect costs.

Project
Phase
ItemDirect Cost
US$
Indirect
Cost US$
Contingency
US$
CAPEX US$
Phase 1
South
Plant
South Lithium Extraction Plant,
Train 1 Carbonate Plant and
Ancillary Infrastructure 
$79,959,000 $56,978,000 $34,234,000$171,171,000 
Phase 2
West
Plant
West Lithium Extraction Plant,
Train 2 Carbonate Plant and
Ancillary Infrastructure 
$74,355,000 $54,587,000 $32,236,000 $161,178,000 
Phase 3
Central
Plant
Central Lithium Extraction
Plant, Train 3 Carbonate Plant
and Ancillary Infrastructure 
$49,812,000 $34,038,000 $20,963,000 $104,813,000 
TOTAL$204,126,000 $145,603,000 $87,433,000 $437,162,000 

Operating Costs
The operating cost estimate included both direct costs and indirect costs, as well as sustaining capital and allowances for mine closure.  The majority of the operating cost is based on reagent usage required to extract the lithium from the tailbrine, as well as conversion to lithium carbonate.  Out of this, the greatest amount is related to acid and base consumption (hydrochloric acid and caustic soda), and was estimated using information from the mini-pilot studies completed to date; it should be noted that optimisation of reagent usage during the mini-pilot studies was not conducted, and hence, it can be reasonably assumed that future reagent consumption can be optimised.  As such, the estimates provided are considered to be at the upper end of likely future costs.  One of the key assessments that will be made during operation of the demonstration plant will be studying reagent optimisation and acid/base recovery.

Resource Assessment
The resource present in the Smackover Formation below the Lanxess property was reclassified based on completion of additional brine sampling/geochemistry and advances in the lithium recovery process development work.  Using a cut-off criteria of 100 mg/L, the Lanxess lithium brine resource estimate is classified as ‘Indicated’ according to the CIM definition standards.  The total Indicated Lanxess lithium brine resource is estimated at 590,000 tonnes of elemental lithium, or 3,140,000 tonnes LCE; see below for more detail.

South Arkansas Lithium Brine Project Indicated Resource Statement

ParameterSouth UnitCentral UnitWest UnitTotal
Aquifer Volume (km3)5.838.2916.3130.43
Brine Volume (km3)0.6890.9951.843.52
Average Li concentration
Milligrams per litre (mg/L)
168 mg/L
Average Porosity11.8 %12.0 %11.2 %11.6 %
Total Li resource (as
metal) metric tonnes
(see notes [4] & [5] below)
116,000167,000308,000590,000
 Total LCE resource
(metric tonnes)
(see notes [4] & [5] below)
615,000889,0001,639,0003,140,000

Notes:
[1]     Mineral resources are not mineral reserves and do not have demonstrated economic viability.  There is no guarantee that all or any part of the mineral resource will be converted into a mineral reserve.
[2]     Numbers may not add up due to rounding.
[3]     The resource estimate was completed and reported using a cut-off of 100 mg/L lithium.
[4]    The resource estimate was developed and classified in accordance with guidelines established by the Canadian Institute of Mining and Metallurgy.  The associated Technical Report was completed in accordance with the Canadian Securities Administration’s National Instrument 43-101 and all associated documents and amendments.  As per these guidelines, the resource was estimated in terms of metallic (or elemental) lithium.  The Qualified Person for the Mineral Resource estimate is Roy Eccles, P. Geol.
[5]     In order to describe the resource in terms of ‘industry standard’ lithium carbonate equivalent, a conversion factor of 5.323 was used to convert elemental lithium to LCE.

Lithium Pricing and Production
A detailed future pricing study for lithium chemicals was not completed for this PEA.  The average price used for future sales of battery-quality lithium carbonate was developed by calculating the three-year rolling average from USGS-compiled sales figures.  This future average sales price of US$13,550/tonne is consistent with those used for publicly-released economic assessments of other lithium brine projects in the previous 12 months.  Future selling prices ranging between US$10,840 to US$16,260/tonne were modelled as part of a sensitivity analysis exercise.

The total production of 20,900 tpa lithium carbonate is based on recovery of lithium from the tail-brine stream already being produced at the three operational brine processing facilities in southern Arkansas.  It does not take into account possible future increases in pumping volumes at the plants; possible optimisation by using selected brine supply wells to increase lithium concentrations in the tail-brine stream; nor possible expansion to include brine streams from other brine leases that the Company has access to in the region (e.g. the Company’s Tetra lithium-brine property).

Processing
The PEA is based on a flowsheet that contemplates use of the lithium extraction technology that has been tested by the Company through independent bench-scale and mini-pilot stage testing, and will be tested further in the Company’s Demonstration plant, scheduled for delivery to the South Plant location in Q3 of 2019.  The conversion of the resulting lithium chloride solution to a final battery quality lithium carbonate product is based on existing technology as used commercially at several facilities.

Quality Assurance
The PEA was completed by Worley, with Stanislaw Kotowski P.Eng. as the lead author.  Roy Eccles P. Geol. of APEX Geoscience Ltd. was the QP responsible for the reclassified mineral resource estimate.  Stanislaw Kotowski P.Eng., is a qualified person as defined by NI 43-101, and has supervised and approved the preparation of the scientific and technical information that forms the basis for this news release.  Mr. Kotowski is independent of the Company.  A National Instrument 43-101 report is required to be filed, in conjunction with the disclosure of the PEA in this news release, within 45 days.

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‘Dollar becoming toxic’, more nations searching for alternatives

The US dollar is an anachronism of the modern world economy, according to the director of the Russian Foreign Intelligence Service, Sergey Naryshkin.

Talking at an international meeting of security representatives, he said: “It seems abnormal that the United States, behaving so aggressively and unpredictably, continues to be the holder of the main reserve currency.”

Naryshkin added: “Due to the objective strengthening of multipolarity, the monopoly position of the dollar in international economic relations becomes anachronistic. Gradually, the dollar is becoming toxic.”

The head of the Russian intelligence service said that the use of the dollar presents risks and more nations are looking into finding alternative tools for doing business.

Countries across the globe, including Russia, China, India, and others, have been working to diversify their foreign reserves away from the greenback.

Russia has taken concrete steps towards de-dollarizing the economy. So far, Moscow has managed to partially phase out the dollar from its exports, signing currency-swap agreements with a number of countries, including China, India, and Iran. Russia has recently proposed using the euro instead of the US dollar in trade with the European Union.

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Global marijuana trade is still five to seven years off, but Canada aims to be world’s cannabis king

Cam Battley believes that in the not-too-distant future, his company — one of Canada’s largest licensed producers — will be exporting a “significant chunk” of the cannabis it is growing domestically.

“We have a massive market over in Europe, even in Latin America,” says Battley, chief corporate officer at Aurora Cannabis Inc. “These countries are legalizing medicinal cannabis one by one but they’re not growing as much as us. They’re going to need product, and we’ve already got the ball rolling on exporting.”

It’s a sentiment shared by other major producers here, many of which are spending tens of millions of dollars to build up international footholds with the intent of being key players in the emerging global cannabis industry. But before they can make good on those ambitions, some things will have to change.

Under the Cannabis Act, Canadian producers are currently only allowed to export weed for medical use, and then only to countries that allow cannabis to be imported.

When it comes to recreational cannabis, the rules are ever more strict: a number of international treaties fundamentally ban the movement of cannabis for recreational purposes, regardless of the domestic legal status of cannabis in specific nation.

“Where the rubber hits the road for domestic cannabis producers is that international trade is largely restricted. And my view is that that is unlikely to change in the next five to seven years at least,” says Martha Harrison, a partner at McCarthy Tetrault LLP who specializes in international trade and investment law.

Canada is signatory to three international treaties that prohibit the movement of cannabis for recreational purposes — the 1961 Single Convention on Narcotic Drugs, the Convention on Psychotropic Substances (1971) and the UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, ratified in 1988. Under those treaties, Health Canada has an obligation to restrict the movement of cannabis to “medical and scientific purposes between countries.”

Earlier this year, the World Health Organization, citing new research touting the medical benefits of cannabis made headlines for calling for the removal of the drug from Schedule IV of the 1961 convention, the most restrictive category, which contains Class A drugs such as cocaine and heroin.

But the United Nations has yet to follow through, due in part to the organization’s historically conservative stance on drugs.

“The UN is kind of in an awkward position. They don’t want to dilute controls on marijuana because it would be viewed by some members are diluting controls on all narcotics. It’s kind of that slippery slope argument that you see in governments that are against legalizing marijuana,” says Adams Lee, an international trade lawyer at global law firm Harris Bricken.

According to Harrison, until the UN or the WHO reclassify cannabis and products containing THC outside the scope of international treaties, cannabis trade will be limited.

Nevertheless, a handful of large Canadian cannabis producers such as Aurora, Tilray Inc., Canopy Growth Corp., and Aphria Inc., remain bullish on the prospects for international cannabis trade.

Tilray recently announced the opening of a cultivation facility in Portugal that it says will feed medical demand in Europe and both Aurora and Canopy Growth have large production hubs in Denmark for similar reasons.

While the producers say they are aiming to serve medical markets, these facilities have enough capacity to eventually meet a significant portion of Europe’s demand for recreational cannabis — if and when cannabis is ever permitted to be moved across borders for non-medical purposes.

Harris Bricken’s Lee calls the industry’s optimism “a little bit too rosy.” But, he adds, if Canadian companies want to position themselves as first movers, projecting the “best-case scenario” to investors, then their investments abroad “perhaps make sense.”

“We know that the demand will be there internationally. And right now, we have a significant advantage because American cannabis companies cannot export their product,” says Battley.

Canada’s edge stems from the fact that U.S. federal guidelines continue to classify cannabis as a Schedule 1 drug, making it ineligible for export.

Until that changes (assuming it does), Europeans who consume cannabis for medical reasons will continue to get a taste of Canadian weed.

Canada’s major licensed producers currently export thousands of kilograms of cannabis to supply medicinal markets in countries that lack cultivation capacity.

And as Canadian production of cannabis has ramped up, so have cannabis exports: Since 2015, when it became legal to trade cannabis for medical purposes, shipments of dried cannabis have tripled.

Most this product goes to Germany, a country of 82 million people, where cannabis is legal for medical use and insured by the government as part of its national pharmacare program.

Producers only need an export permit from Health Canada and a import permit from the German government in order to begin their shipments.

“We’ve gotten good at this, we’re able to get our permits on both sides in under 30 days,” says Battley, who credits Aurora’s German branch (Aurora Deutschland) with administering the trade process.

Harrison, for her part, believes that the scenario most likely to have a domino effect on the international trade of cannabis is if countries begin reclassifying cannabidiol (CBD) as a permitted medical ingredient in the same vein that ingredients in natural health products are. “Based on industry intelligence, I can say that the trade on CBD oil is going to open up in a quicker and more fluid way that recreational cannabis.”

“That’s going to engender a larger regime shift in how governments and international bodies view the movement of cannabis globally. It’ll be good if Canada can lead the way on that.”

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Facebook’s cryptocurrency chief says if you don’t trust our digital wallet use our competitors

An executive behind Facebook’s venture into cryptocurrency told CNBC on Tuesday that consumers shouldn’t be worried about the social media network gaining access to their financial data.

“To earn people’s trust, we are going to have to make strong commitments on privacy,” said David Marcus, the head of Facebook’s Calibra division, a newly announced subsidiary to host a digital wallet by the same name for storing and exchanging the digital coin called Libra.

“If people don’t want to trust us, they can use any of the other wallets that will be available,” Marcus said in a “Squawk Box ” interview. “There will be plenty of competition.”

At a time when it is trying to rebuild user trust after data privacy and security scandals, Facebook announced Tuesday an ambitious endeavor to create Libra and launch it in the first half of 2020.

The goal — using blockchain, the technology underlying bitcoin on other cryptocurrencies — is to make it as easy to send money across the world as it is to send a photo. But unlike bitcoin and others, Libra will be backed by more stable government-backed money.

The Libra currency will not be run by Facebook, but rather by a nonprofit association supported by a range of companies and organizations.

“We painstakingly removed ourselves from governing this network,” said Marcus, the former PayPal president whom Facebook hired in 2014 to lead its Messenger app.

The Calibra digital wallet will be the way Facebook eventually makes money through financial services such as loans. However, Marcus said those add-ons won’t happen anytime soon.

Marcus said the latest venture is “very close” to Facebook’s mission of connecting people across the world. People in the U.S. are privileged when it comes to having a stable currency and trusted institutions, he said. “But that’s not the case for many people across the world.”

He said the new currency would lower the barrier for cross-border payments.

“We felt it was time to try something new, and this is the beginning of a long journey in launching this new network,” Marcus said. Other cryptocurrencies are “investment vehicles or investment assets rather than being a great medium of exchange. [Libra] is really designed from the ground up to be a great medium of exchange, a very high quality form of digital money that you can use for everyday payments.”

Shares of Facebook opened Tuesday’s trading up 2.3%, after soaring more than 4% to $189 per share on Monday ahead of the announcement. The stock has gained 44% this year.

Libra is backed by other payment companies, including Visa and PayPal and tech giants eBay, Lyft, Spotify and Uber. The 27 companies in total each will be expected to invest a minimum of $10 million to fund the project, according to The New York Times.

Reports speculating about the Facebook news over the past few weeks helped boost the price of bitcoin. The world’s biggest digital coin jumped across the $9,000 level on Sunday, on the thought that Facebook’s entry in crypto would add legitimacy to the industry. Bitcoin gained ground Monday as well, but slipped some in Tuesday trading.

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Cannabis edibles and infused products could be $2.7B market

The Canadian market for next-generation cannabis products is worth an estimated $2.7 billion annually, with edibles contributing more than half, according to a new report from Deloitte.

This spending once the final edible pot regulations roll out in the coming months is expected to be on top of the roughly $6-billion estimated domestic market for recreational and medical cannabis, the consultancy said Monday.

Consumers are looking to snap up these new pot products in addition to the dried flower, oils, plants and seeds they have been buying from legal retailers since legalization last fall, a recent survey of 2,000 Canadians conducted by Deloitte suggests.

The first wave of legalization last October was quite limited in terms of product range and the type of consumer, said Jennifer Lee, Deloitte Canada’s cannabis national leader.

“When we legalize in October again for edibles, we are in a world where the formats and the assortment is much broader,” she said. “The use cases are much broader.”

Cannabis-infused foods, other products

Canada is gearing up to legalize cannabis-infused foods, beverages, topicals and other next-generation products in the coming months, once Ottawa rolls out the final regulations.

Pot companies, as well as food and beverage makers, have been preparing to roll out their own pot-infused products which they anticipate will appeal to a broader audience — particularly those who aren’t interested in smoking weed.

The federal government wrapped up its consultation on the draft edible rules in February, and has said the regulations must be brought into force no later than Oct. 17, 2019.

Deloitte estimates that roughly $1.6 billion will be spent on edibles in Canada, followed by cannabis-infused beverages at $529 million and topicals at $174 million. Spending on concentrates is expected to hit $140 million, followed by tinctures at $116 million and capsules at $114 million.

Waiting for the gummy bears, cookies

Roughly half of likely edible users surveyed by Deloitte say they plan to consume gummy bears, cookies, brownies or chocolate at least every three months.

The global market for alternative cannabis products is expected to nearly double over the next five years, the consultancy added.

Lee doesn’t expect these new products to eat into revenues from existing categories in Canada, at least in the early days.

“Over time, in the long term, you may,” she said. “But right now, there’s too much demand in the market and there’s not enough product.”

Legal pot retailers, both government and privately owned, have been contending with a shortage of cannabis since legalization last October, but have said the situation has improved in recent months.

Shortage of cannabis easing

For example, the Alberta government lifted its moratorium on new cannabis retail licences, citing an increase in the pot supply.

Deloitte’s market estimates for cannabis 2.0 products reflect overall Canadian consumer demand, but realizing the market’s full potential too may take some time. Many of the new pot products may not be available, or available in sufficient quality, come October, Deloitte said.

Companies should take a three- to five-year view on the market, said Lee.

“The regulations will need time to settle, even after legalization in October,” she said.

While this presents a growth opportunity for companies readying themselves for the next wave of the green rush, it may come at the expense of sales in more established industries.

“Our research is showing that the occasions that consumers use the product, i.e. mostly edibles, overlap a lot with alcohol … On a limited wallet, there are going to be tradeoffs,” Lee said.

As well, consumers view topical cannabis products such as lotions used for ailments such as pain as a potential replacement for other medicinal products, Deloitte’s survey showed.

“This could be cause for concern for the traditional pharmaceutical sector, as 45 per cent of current consumers and 48 per cent of likely consumers say they see cannabis topicals as an alternative to prescription medications, not a complement,” Deloitte said in the report.

Deloitte surveyed 2,000 adult Canadians online between Feb. 26 and March 11.

According to the polling industry’s generally accepted standards, online surveys cannot be assigned a margin of error because they do not randomly sample the population.

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