TSXV-listed lithium mine explorer and developer Desert Lion Energy’s objective to deliver Namibia’s first large-scale lithium mine is on the horizon.
Having ticked all of the pre-project development boxes that guarantee a financially viable operation, the company is looking to start producing a lithium concentrate product by early 2020, president and CEO TIM JOHNSTON tells LAURA CORNISH.
This article first appeared in Mining Review Africa Issue 2, 2019
Africa is a hive of activity with early-stage lithium juniors looking to develop new mines and contribute to the rapidly increasing demand for lithium ion batteries.
Most are still many years away from even determining their assets viable for development. By comparison with its peers, Desert Lion Energy is the at the frontline of this sector and potentially less than 12 months from production start-up.
Located in a mining-friendly jurisdiction with all the required supporting infrastructure already in place to support its project and a high quality asset, Desert Lion Energy offers the market another attribute which truly distinguishes it other lithium juniors – a CEO with extensive lithium project delivery experience across the globe.
The ideal man for the job
A mechanical engineer and CFA charter holder, Johnston worked at global engineering firm Hatch for 10- years where in that time he helped set up a lithium speciality practice in Australia in 2008, which followed on the success of building Galaxy Resources’ (now Tianqi) lithium carbonate plant in China – the first ‘Western style’ lithium plant built, together with other work we did in the sector at the time.
“We saw this as an opportunity to become the specialist engineering firm to provide support for lithium developments around the world. It grew into a successful practice after which I took the technical skills set across to our management consulting and advisory practice where we also acquired lithium-related work for a number of different companies including SQM and Rio Tinto - helping them understand what makes a viable lithium project,” Johnston begins.
Having in that time developed a background heavily geared around lithium, Johnston in 2016 identified three key components missing from the industry:
- Limited producing assets – only 10 operating lithium mines in the world outside of China
Having met with Desert Lion Energy chairman and investor Adonis Pouroulis who shared the same vision to establish lithium-focused businesses outside of China, Johnston helped establish a company focused on tracking lithium pricing trends.
Having also identified a lithium asset in Namibia in mid-2016 – at the time in due diligence phase, the CEO quickly recognised its potential and took up his position as CEO of the company in September of the same year.
Situated in Namibia, about a two-hour drive from Swakopmund, Johnston highlights the established infrastructure in place to support the project. It has access to an international highway and rail.
There is a water pipeline that runs through the property and three potential pick-up points for power.
“Infrastructure is critical to new lithium mine developments – because they are not multi-billion type projects where capital outlay to support infrastructure development is warranted because of their large-scale size.
"Lithium projects by comparison are considered relatively small operations and in most cases can’t deliver returns if substantial cash sums need to be spent first on support infrastructure,” Johnston outlines.
Project development outline
Desert Lion Energy’s lithium tenement lies within the Damara Belt – a well-known, large pegmatite belt that runs across Namibia.
The company’s 501 km² land package comprises three former producing lithium mines which operated from the 1960s to the early 1990s, supplying petalite lithium to the ceramics and glass industries at the time.
“They unfortunately were not able to ‘hang on’ beyond this and benefit from the new demand for batteries, which was first commercialised by Sony in 1991.”
Since then there has not been a lot of ‘Western-style’ exploration on the property but we know there is still lithium to be exploited – the lepidolite mineralisation is purple which contrasts against the landscape making it highly visible.
Having further evaluated the potential cost structure (logistics, energy and labour are driving factors) of the asset, “it today has all the signs of being a low cost asset that we can move into production quickly as we plan to.”
Desert Lion Energy officially acquired the property early in 2017 and commenced with a traditional development profile process – permitting, completing cost studies, etc. Included in the tenement was about 500 000 t of lithium-bearing material, stockpiled during the mines’ operating lifespan.
“These stockpiles offered us the opportunity to generate cash by extracting the lithium which at the time represented the start of a staged production approach. The stockpiles required sorting to extract the lepidolite material which we successfully did.
"The intention at this time was to follow with the production of a high grade concentrate through milling/flotation to produce a 4% lithium oxide concentrate. The final step would then move into chemical production to produce lithium carbonate,” Johnston explains.
The year saw the company obtain all of its necessary permits and commence mining the stockpiles in late December.
The first half of the year delivered multiple milestone achievements for the company. Having mined the stockpiled material, 30 000 t of sorted lithium concentrate was shipped to its off-take partner, Jiangxi Jinhui Lithium Co.
Desert Lion Energy entered into a binding offtake agreement with the Chinese lepidolite converter in August 2017 to acquire all the lithium concentrate from Phase 1 production of the stockpiled material).
“It was the largest shipment of lithium ever made from the African continent – delivered on budget within two weeks of the initial ramp-up schedule.”
As the company approached its second shipment it was affected by a sudden but rapid drop in the spot price of lithium – making the course sorting process uneconomical.
“We ultimately stopped production and went through a process of refinancing and restructuring the company.”
In early December the company closed a new tranche of financing which included capital provided by Toronto-based fund AIP Asset Management through a convertible facility and a private placement led by Pella Resources/ Adonis Pouroulis.
The cash was injected back into the company to position it to again move towards high grade concentrate production. “We want to be exposed to a higher margin product which we consider the long-term viable way to develop this business.”
Regardless of the unexpected challenges at the time, DLE also received its full mining licence in August 2018 – to mine in-situ material for the next 10 years.
In parallel, a lot of additional engineering and development work was undertaken and 20 000 m of diamond drilling (mostly) completed which enabled the company to release its maiden resource estimate in October.
Highlights of the estimate include 3 Mt at a grade of 0.63% lithium oxide in the indicated category at a 0.20% cut-off, and 5.8 Mt at a grade of 0.53% lithium oxide in the inferred category at a 0.20% cut-off.
“At these numbers it makes us the largest code-compliant lepidolite deposit in the world today and we still see a lot of upside in our resource which we want to confirm in 2019.”
In conjunction with its maiden resource estimate the company also released its preliminary economic assessment which was completed by Hatch and the MSA Group and entailed about 7 000 hours of engineering work including test work from ore to lithium chemical.
“It confirmed we have one of the lowest capital intensity projects in the world under development. We have an operating cost that puts us ahead of most potential hard rock producers in Australia with the exception of Nemaska in Canada.”
2019: Returning to production
“We now have a highly advanced property and our focus has returned to the original phase 2 plan of delivering a high grade concentrate production before going to phase 3, lithium carbonate production.”
Desert Lion Energy commenced with the construction of a flotation plant in July 2018 and although put on hold during the restructure process should pick up activity shortly to enable it to meet its production start-up date.
At this stage Desert Lion Energy is looking to produce (as an initial phase) about 100 000 tpa of product, of which about 85 000 tpa will be lepidolite concentrate and the balance petalite concentrate as well as a small amount of tantalum concentrate.
“Our goal is to complete construction of the new concentration plant early 2020 subject to financing and them ramp this plant up in the first half of 2020.”
The maiden resource focuses on production from the historic Rubicon and Helikon mines and equates to an eight-year lifespan. The company has however also identified over 30 new lithium-bearing pegmatites in the region and is in the process of collecting soil samples in these areas to prioritise specific targets for drilling.
Expanding the resource and then extending the project’s lifespan is a priority for the year – being conducted while the company is finalising its strategic partnerships.
Up for consideration at present as well is to by-pass selling just a concentrate product and move directly to chemical production which would require construction of both plants in parallel – to ultimately produce about 10 000 tpa of lithium carbonate equivalent.
“We are in discussion with our potential downstream partners to determine their demand profile for this.”
Desert Lion Energy will look to announce its execution strategy decision regarding this in Q2, 2019.