Lithium: AVZ furthers Manono project via offtake with Ganfeng

AVZ Minerals logo

On 24 December 2020, AVZ Minerals, owner of the DRC-based Manono lithium project, announced it had secured a significant offtake agreement with a subsidiary of Ganfeng Lithium (Ganfeng). The agreement stipulates that subsidiary, GFL International, will purchase up to 160ktpy of spodumene concentrate at a grade of 6% Li2O from the Manono operation, initially for five years, but with the option to extend. The details of the agreement state that sales volumes will ramp up to 160ktpy of concentrate by year 3 of production, which will represent around 30% of the project’s output. Pricing for the offtake will be based on CIF China prices of lithium carbonate and hydroxide, with adjustments based on quality and a scaled collar price mechanism.

Roskill View

The Manono project is based in the DRC and currently at feasibility level development; it represents one of the largest lithium projects likely to come online this decade. The project has a stated resource of 400.4Mt of ore at a lithium grade of 1.65%. With this comparatively high grade, project test work has indicated favourable recovery rates for production of a 6% spodumene concentrate.

When examining the Manono project from a cost perspective, the high grade, large production scale and low labour cost mean that the mine site costs of the operation are predicted to be notably lower than for many of its peers.

However, these cost gains are somewhat offset by the significant transport cost component to the project. Due to the remote nature of the deposit, the cost of transporting large amounts of spodumene feedstock is the greatest determinant of overall costs for Manono. This large cost is due to the need to transport feedstock over long distances, via both road and rail, to the ports of Dar Es Salaam (3,137km) or Lobito (2,486km), costing US$275/t and US$229/t of concentrate respectively.

When comparing these transport costs to those in current lithium mineral producing countries, the distinction becomes clear, with Australian, Zimbabwean and Brazilian producers averaging approximately US$10/t to US$20/t of concentrate transport cost on a FOB basis. When factoring in the mine site and CIF transport costs, the Manono project is predicted to sit in the mid-quartiles of the industry cost curve. As a result, any reduction in the large transport cost component will greatly benefit the project’s overall All-In Sustaining Cost. In time, there may be the possibility to re-negotiate transport costs down, as is currently being seen in the cobalt market.

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This article was written by Dominic Wells. Please get in touch below if you wish to discuss further:

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