Guest column: Benchmarking Canada’s hard rock lithium projects

[Redator]

Canada has seen a surge in hard rock lithium exploration and development activity following the discovery of Patriot Battery Metals’ globally significant Corvette (CV5) pegmatite in Quebec in 2021, the enactment of the US Inflation Reduction Act (IRA) which incentivizes “friendshoring” of supply chains, and a rally in global lithium prices that peaked in 2022. A host of feasibility studies emerged between 2023 and 2025, the latest of which Adamas Intelligence benchmarked in this insight.

Existing producers of spodumene concentrate include the twice bankrupt and re-capitalized North American Lithium mine in Quebec (a joint venture between Sayona Mining and Piedmont Lithium), the Chinese-owned Tanco mine in Manitoba, and Quebec’s Whabouchi mine due to be commissioned in 2025 after also emerging from bankruptcy proceedings.

Spodumene concentrates have mostly been exported to China for chemical conversion. Localization of conversion capacity has been envisioned for decades, but a number of factors including the remoteness of Canada’s spodumene endowments, the marginal profitability of spodumene concentrators together with the immaturity of lithium refining intellectual property and skillset development, have meant these endeavors have failed to attract investment.

Tesla has taken it upon itself and is currently commissioning a conversion facility in Texas (with offtake from the North American Lithium mine), while Rio Tinto is aiming to commission a conversion facility in Bécancour integrated with the Whabouchi mine in 2026.

The outstanding cohort of Canadian hard rock lithium developers are increasingly tapping technical and funding partners to assist project development. One such example is Frontier Lithium which recently signed a joint venture agreement with Mitsubishi Corporation of Japan. Both provincial and federal governments have also pledged financial support for the project.

In May this year, Frontier Lithium released a Definitive Feasibility Study for the PAK spodumene concentrator in Ontario. To benchmark the results, Adamas Intelligence compared PAK to seven selected spodumene concentrate projects which range in accuracy from Preliminary Economic Assessment to Feasibility Study levels.

First, capital intensity is calculated taking life-of-mine capital requirements on a per tonne produced (lithium carbonate equivalent contained in spodumene concentrate) basis, gross of government tax credits, such as the federal Clean Technology Manufacturing Investment Tax Credit (CTM-ITC).

Next, expected operating costs are broken into the five cost centers – mining, processing, transport, general and administrative, and sustaining and closure.  The results are presented on a per tonne 6.0% Li2O spodumene concentrate equivalent basis.

Note: Price-dependent factors such as royalties and bi-product credits are excluded. Closure costs are also inconsistently accounted for in the studies.

Frontier Lithium’s PAK screens as a high CAPEX, low OPEX project.

The 1.0 Mtpa concentrator is set to cost US$688M which is very high by global standards. This is in part due to the relative remoteness of the project in northwestern Ontario.

PAK has the highest reserve grade of the group, at 1.51% Li2O.

Its fine-grained spodumene ore demands a whole-of-ore froth floatation plant, conceptually similar to recently commissioned Kathleen Valley mine in Western Australia and Ganfeng Lithium’s Goulamina mine in Mali.

The thick, vertically dipping ore bodies, lend to low strip ratio, low-cost open pit mining.

Despite whole-of-ore froth floatation placing greater demands on comminution and material handling, PAK’s processing costs are comparable to peers who have adopted dense media separation process designs like the Adina and Galaxy projects.

PAK’s concentrate transport costs are also low, given delivery is set for the presumptive chemical plant location in Thunder Bay on Lake Superior, Ontario. The Seymour project shares this characteristic.

In contrast, the remaining six projects in Quebec deliver to ports on the St. Lawrence River, with direct access to international markets via ocean freight. On this basis, comparison of transportation costs is not like-for-like.

The remaining cost centers, G&A and sustaining capital, demonstrate the study managers’ contrasting approach to cost allocation and capitalization as they pertain to reporting standards (JORC vs. NI 43-101). Ultimately, these can be reconciled within normalized incentive prices, IRR or NPV calculations.

To harmonize both capital and operating cost metrics without the use of discounted cash flow models, an incentive price is formulated with the units USD per tonne SC6.0% Li2O:

Note: It is assumed the projects target an IRR of 20%, and total corporate taxes (provincial and federal) are 31.5% in Ontario and 38% in Quebec.

$1,500/t SC6 is widely considered an appropriate price to incentivize the required volumes of spodumene concentrate to meet long term demand. To achieve 20% IRR, a minimum rate of return widely accepted by industry, PAK requires a pricing environment of around $1,500/t SC6. By comparison to Canadian peers, and certainly in a global context, PAK demonstrates marginal economics.

Encouragingly, PAK’s incentive price is lower than the recently constructed Whabouchi mine per its December 2022 pre-feasibility study. It is worth highlighting Whabouchi’s costings also included sunk CAPEX as the “half-completed plant” was re-capitalized, and the flowsheet reenvisioned under the new owners – Rio Tinto and the government-owned Investissement Quebec.

In principle, PAK’s feasibility study level costings will be more conservative than half of the peer group assessed at PEA or PFS levels.

Furthermore, PAK is uniquely royalty free within the peer group. By contrast, Winsome’s Adina project will pay out a 4% NSR, which at $1,500 SC6 price adds $55/t SC6 to its cost profile (this has not been considered within the above calculations).

If we consider Moblan and Galaxy as strategically important growth projects for Sayona Mining (soon to be Elevra Lithium) and Rio Tinto, respectively, what remains are five flagship projects held by listed junior mining companies.

In other words, it may be prohibitively difficult for outside capital to participate in these projects, thus the universe of pure-play eastern Canadian spodumene opportunities shrinks, and PAK then ranks behind Adina and Shaakichiuwaanann.

With this glass-half-full perspective, third place is a respectable position. In our view, the project has the potential to attract the necessary capital and advance into construction, but only in a prolonged, pro-cyclical price environment, and only where friendshoring critical mineral supply chains are the order of the day.

* Christopher Williams is an analyst with Adamas Intelligence Battery Metals Forecast Service.