Avalon Advanced Materials (TSX: AVL; US-OTC: AVLNF) has tabled an updated preliminary economic assessment (PEA) for its Separation Rapids lithium project near Kenora, Ont., that it says "reflects a simplified business model" by producing only lithium concentrates rather than battery materials.
The company says the new model reduces initial capital expenditure, but still gives it the option to convert concentrates into lithium hydroxide and lithium carbonate in the future.
The updated PEA contemplates a 475,000 tonnes per year throughput rate, down from the 950,000 tonnes per year rate presented in the original 2016 document.
At this rate, the project could produce 71,500 tonnes petalite and 11,800 tonnes lepidolite per year over 18.5 of the mine's 20 operating years. Beginning in year six it would produce 100,000 tonnes feldspar per year to the end of the mine's life.
The project would cost an initial $77.7 million. The feldspar circuit would cost an additional $13.7 million. That's down significantly from the original $507 million capital cost, which includes a hydromet plant in Kenora worth half the expense.
Under the new model, the project has a $102 million after-tax net present value at an 8% discount rate and a 22.7% after-tax internal rate of return. The original model had a $228 million after-tax net present value at an 8% discount rate and a 16% after-tax internal rate of return.
The company aims to begin a feasibility study on the project in late 2018, but before it can do so it must "finalize reagent recycling and water treatment processes" and secure more funding. It also aims to upgrade some inferred resources to the indicated category through further drilling.
The project currently contains 8.12 million measured and indicated tonnes grading 1.37% lithium oxide and 0.36% rubidium oxide. It contains an additional 1.2 million inferred tonnes at 1.33% lithium oxide and 0.36% rubidium oxide.
Shares of Avalon are currently trading at 7 ? with a 52-week range of 7 ? to 16 ?. The company has a market capitalization of $16 million.