The 3Q Project

The 3Q Project is located in the southern end of the “Lithium Triangle” in the Puna Plateau. The area is characterized by high altitude salt flats, many of which contain elevated lithium concentrations.

The largest brine lithium mines and projects in the world are located in salars in the Lithium Triangle including Atacama Salar (SQM and Albermarle), Cauchari-Olaroz Salar (Orocobre and Lithium Americas Corp) and Hombre Muerto Salar (FMC and Galaxy).

3Q is one of the fastest growing lithium brine projects in the industry, moving from discovery to PEA in 22 months. We will continue to progress the 3Q Project into advance development stage in record time.
Waldo Perez

Location

The Project is located in the southwestern portion of the Catamarca Province of Argentina, the largest Lithium producer province of Argentina.

The closest population centre to the Project is the town of Fiambalá, Argentina (population 5,000), located 100 km east of the Project.

There are no aboriginal communities or inhabitants in the Project area, which is only 25 km from the border with Chile.

Image Highway and Mountains

Infrastructure

The closest highway to the Project is Ruta Nacional 60, which connects the capital city of Catamarca (San Fernando del Valle de Catamarca) to Copiapó and the seaport of Caldera, via Paso de San Francisco. The project is connected to the highway by an all-weather 60 km dirt road.

Over $10 million was invested in the 3Q Project by September 2017, with a 60 person year-round camp.

Despite being discovered on in December 2015 by the founders of the company, the 3Q Project is already fully equipped not only with the full camp and access road, but also with a last generation weather station operating year round, a full geochemical analytical lab on site, solar and diesel power, as well as a zero waste sewage system.

Image constructions
Image trucks and cars
Image people

Process Studies

The process begins with the extraction of brine through production wells. From the wells, the brine is pumped into large solar evaporation ponds. The evaporation process in the solar ponds starts with a pre-concentration stage where more than 90% of the sodium chloride from the brine is expected to crystallize out. This pre-concentration stage has an evaporation period of approximately 160 to 180 days, during which the volume of brine is reduced by approximately 95%.

In order to promote the production of lithium carbonate at the lowest possible cost, the solar evaporation process will be designed so that the lithium concentration in the brine reaches values in the range of 2.5%. The pre-concentrated brine is then subjected to chemical treatment with sodium sulfate in order to remove most of the calcium present. The precipitation of gypsum and then post-concentration will bring the lithium concentration in the brine to approximately 6%.

From there, the 6% brine is to be transported to a processing plant to be built in the town of Fiambala, Catamarca (approximately 160 km from the 3Q Project).

The processing plant for producing lithium carbonate includes the final purification of the concentrated lithium brine feeding the lithium carbonate precipitation stage. For this purpose, the conventional process used by lithium carbonate plants in operation has been taken as a reference, which includes the following:

Elimination of the boron content by solvent extraction. First stage where boron-free brine is mixed with mother liquor from the lithium carbonation stage to dilute lithium to 1% and remove Ca (Calcium) and some Mg (Magnesium). Second stage treatment of the boron-free brine with a mixture of slaked lime and soda ash, to remove low residual levels of magnesium. The purified brine, containing 1% lithium dissolved as lithium chloride, is transferred to three reactors in series, where lithium carbonate is precipitated by the addition of sodium carbonate solution (at 28 wt.%). The slurry containing the precipitated product is separated from the mother liquor by filtration and is washed with soft water. Finally, the product is dried, classified and packed.

Image Drilling

Drilling

A total of 10 diamond drill holes (totaling 1,960 metres) and 13 rotary wells (totaling 1,177 metres) were completed in 11 platforms by the company in the first season of drilling. The diamond drill holes had core recovered in HQ triple tube. Of the 10 holes used for the resource analysis, only three reached the basement; all others were terminated after reaching target depth or due to drill limitations. The total thickness of the basin, and the total thickness of saturated sediments, is unknown for most of the basin.

The Company has initiated the second round of drilling to upgrade resources into reserves and explore upside potential at depth on already drilled sectors and sectors that remain unexplored.

Maiden Resource Calculation

A Resource Estimate was developed for the 3Q Project using three-dimensional block modeling software. The modelling was supported by geology, drilling, hydrogeology, geophysics and geochemical data and interpretations provided by the QP and 3Q Project geologists.

The modeling generated a Measured, Indicated and Inferred Resource Estimate, as defined by the CIM and referenced by the National Instrument 43-101 Technical Report.

Results of the Resource Estimate are provided below, relative to cut-off grades of 400 and 520 mg/L lithium.

3Q Project Lithium Resource Statement at 520 mg/L Lithium Cut-off

520 mg/L Lithium Cut-off 400 mg/L Lithium Cut-off
Avg, Lithium (mg/L) Li2CO3 Equivalent (tonnes) Avg. Potassium (mg/L) KCI Equivalent (tonnes) Avg. Lithium (mg/L) Li2CO3 Equivalent (tonnes) Avg. Potassium (mg/L) KCI Equivalent (tonnes)
Measured 792 52,569 7,434 176,764 792 52,569 7,434 176,764
Indicated 710 661,673 6,439 2,149,485 560 1,171,735 5,335 3,997,901
Total M&I 716 714,242 6,506 2,326,249 567 1,224,305 5,400 4,174,666
Inferred 713 1,339,546 6.554 4,413,778 567 2,237,803 5,413 7,765,672
  • 520 mg/L Lithium Cut-off
  • 400 mg/L Lithium Cut-off
Measured 792 52,569 7,434 176,764
Indicated 710 661,673 6,439 2,149,485
Total M&I 716 714,242 6,506 2,326,249
Inferred 713 1,339,546 6.554 4,413,778
Measured 792 52,569 7,434 176,764
Indicated 560 1,171,735 5,335 3,997,901
Total M&I 567 1,224,305 5,400 4,174,666
Inferred 567 2,237,803 5,413 7,765,672

The low magnesium and sulfate content of the resource makes the brine very favourable for potential future processing. The table below summarizes the main impurities ratios for magnesium and sulfate.

3Q Project Impurity Ratios at 520 mg/L Lithium Cut-off

Magnesium/
Lithium
Sulfate/
Lithium
Measured 1.60 0.76
Indicated 2.02 0.50
Total M&I 1.99 0.52
Inferred 2.07 0.54

All the resource included in the 520 mg/L cut-off is in the area known as the Northern Target, which was originally identified by surface sampling that extends over the northern half of the salar.

Preliminary Economic Assessment Highlights

The economic analysis is based upon measured, indicated, and inferred mineral resources only. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The PEA is preliminary in nature and includes inferred mineral resources that are considered too geologically speculative to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the 3Q Project envisioned by the PEA will be realized. The economic analysis of the PEA is based, among others, on the following main assumptions: a) 100% equity financing; b) construction commencing in 2019; c) production ramp up of three years from 2021 to 2023; and d) all capital costs, operating costs and revenues in the economic model are calculated on a constant U.S. dollar basis.

Preliminary Economic Assessment

After-Tax Net Present Value (“NPV”) @ 8% Discount Rate US$1,200 million
After-Tax Internal Rate of Return (“IRR”) 27.9%
Capital Expenditures US$490.2 million
Cash Operating Costs (per tonne of lithium carbonate) US$2.791
Average Annual Production (lithium carbonate) 35,000
Mine Life 20 years
Payback Period (from commencement of production) 1 year, 8 months

Capital Costs

Description US$ Million
Direct Costs
Evaporation Ponds and Wells $178.4
Plant Facilities and Equipment $62.8
Infrastructure and Others $80.2
Direct Costs Subtotal $321.4
Indirect Costs $88.5
Contingency $80.3
Total Initial Capital Costs $490.2

The total direct capital costs of the Project are estimated to be $450.1 million, excluding indirect costs and contingencies. The total initial capital costs of the project are estimated to be $588.7 million. Contingency costs are comprised of 15% of the direct costs.

Operating Costs

Description US$000/yr US$/tonne Li2CO3
(lithium carbonate)
Direct Costs
Chemical Reactives and Reagents $53,934 $1,541
Salt Removal and Transport $23,620 $675
Energy $10,820 $309
Manpower $4,713 $135
Catering and Camp Services $1,659 $47
Maintenance $1,570 $45
Direct Costs Subtotal $96,317 $2,752
Indirect Costs
General and Administration $1,359 $39
Indirect Costs Subtotal $1,359 $39
Production Total Costs $97,677 $2,791

Neo Lithium has reviewed a number of publicly available lithium price forecasts and there are some variations between each source. For the purposes of the PEA, Neo Lithium used the average pricing assumptions as per below:

Lithium Markets and Price

US$/tonne
Year 2021 2022 2023 2024 2025 and Long term
1 2 3 4 5
Lithium carbonate 10,869 11,026 11,273 11,601 11,834

Average lithium carbonate pricing estimate over the life of mine is approximately $11,760 per tonne.

Base Case Sensitivity Analysis

Discount Rate NPV After Tax US$ Million IRR After Tax NPV Pre Tax US$ Million IRR Pre Tax
6% $1,545 27.9% $2,400 33.7%
8% $1,200 27.9% $1,889 33.7%
10% $933 27.9% $1,495 33.7%

Qualified Person

The mineral resource estimation was prepared by Geo. Marisa Franciosi using Geosoft Target 9.1 for Arc GIS under the supervision of Dr. Mark King, Ph.D, P.Geo. of Groundwater Insight. Inc, a Qualified Person as defined in NI 43-101.

Randy Pitts, Mining Engineer, Qualified Professional Member (QP) of Mining Metallurgical Society of America (MMSA) is an independent qualified person and has reviewed and approved the disclosure regarding the 3Q Project on PEA.