Elevra fires up NAL lithium mine expansion

Elevra Lithium (ASX: ELV; Nasdaq: ELVR) has started building a $366-million (US$271-million) expansion of its North American Lithium mine in Quebec and is negotiating another price-protected offtake as it moves to nearly double production by 2029.

A prefeasibility study released last month lifts NAL’s expected annual post-expansion output to 373,000 tonnes of spodumene concentrate from 199,000 tonnes without the expansion. Stage one is to add 15% to 20% to production from mid-2027, with CEO Lucas Dow expecting the first incremental tonnes in June.

“We’re into execution on stage one,” Dow told The Northern Miner in a September interview. “It’s all guns blazing, basically, on site at the moment. The team’s got the bit between the teeth, as they say, and they’re really going for it.”

The expansion is part of Brisbane-based Elevra’s effort to push NAL down the cost curve while securing customers through lithium-price swings. Its supply agreement with private, British Columbia-based Mangrove Lithium could create a domestic route for converting much of NAL’s output into battery chemicals instead of shipping concentrate overseas.

Down the curve

The three-stage brownfield expansion adds milling, flotation, filtration and crushing capacity. Stage two is due to lift milling capacity to 6,500 tonnes per day in mid-2028, while a permanent crushing circuit and more ore sorting are scheduled for mid-2029.

Post-expansion cash operating costs are forecast at US$630 per tonne of concentrate, with all-in sustaining costs of US$680 per tonne. The study puts the expansion’s incremental post-tax net present value at $943 million, using an 8% discount rate, with a 50% internal rate of return and 34-month payback.

Higher volumes account for much of the cost reduction by spreading fixed costs over more tonnes, Dow said. Recoveries are also expected to improve to about 71% from 69%.

“At that sort of level, we’re in a strong position in terms of being able to weather the cycles of the industry,” he said.

Elevra funded the expansion in May through equity financing and up to $145 million in convertible notes from the Canada Growth Fund. The company says the project is fully funded, though the capital estimate is still preliminary and could vary by about 40% either way.

The main inflation risk is Quebec’s tightening construction labour market, Dow said. Execution risk is otherwise relatively low because NAL is already operating and the expansion relies largely on more of the same equipment and processes.

Floor protection

Elevra is also trying to protect the expanded operation from a repeat of the severe price swings that have battered lithium producers over the past several years.

Its binding agreement with Mangrove calls for 122,000 tonnes of spodumene concentrate in the first year of commercial operations and 144,000 tonnes annually from the second year on. That later volume would equal about 39% of NAL’s planned post-expansion output. The seven-year deal can be renewed for another seven years.

Pricing is linked to the spodumene market but carries a floor that Elevra expects will sit above NAL’s production costs. Unlike an earlier memorandum of understanding, the final agreement has no ceiling, allowing Elevra to benefit from higher lithium prices.

Dow disclosed that Elevra is negotiating another offtake that would use a similar floor.

“The key piece is just to take the volatility out of the sector,” he said. “It’s still relatively immature. It’s growing very quickly.”

The Mangrove deal also offers another saving: freight. NAL concentrate currently destined for overseas converters carries ocean shipping costs that could be avoided if the material stays in Canada.

“We’re desperately crying out for downstream conversion capacity in Canada and particularly in Quebec,” Dow said.

Conversion test

That capacity is not built yet. Mangrove plans a 20,000-tonne-per-year lithium conversion plant in Eastern Canada using an electrochemical process designed to substitute electricity for many of the chemical inputs used by conventional converters.

Its 1,000-tonne plant uses one module of the technology. Rather than build a much larger version of that module for the commercial plant, Mangrove intends to repeat it, CEO Saad Dara said.

“We’re actually not doing scale-up,” Dara said in the same interview. “We’re really numbering up.”

Mangrove has secured as much as US$85 million in financing led by the Canada Growth Fund. The federal government said CGF committed up to US$65 million as part of the financing package.

Dara said that money is intended to demonstrate the technology, complete the advanced engineering, secure a site and carry out other work required to reach a final investment decision by the end of 2027.

That funding won’t finance construction of the 20,000-tonne commercial plant. Mangrove expects to raise more capital after the investment decision.

Mangrove says its process could compete with Chinese conversion costs because it eliminates much of the chemical consumption and sodium sulphate waste associated with conventional processing. Dara acknowledged the economics still have to be demonstrated at commercial scale.

Beyond NAL

Success could eventually give Elevra options beyond its operating Quebec mine.

The company owns 60% of the Moblan project in Quebec’s James Bay region and the Carolina Lithium project in North Carolina. Elevra was created last year through the combination of Sayona Mining and Piedmont Lithium, bringing those assets together with NAL under one company.

Dow said he could eventually see another Mangrove plant supporting Moblan. Carolina could be an even stronger fit because that project had already been contemplated as an integrated mine and conversion operation.

“If things go as we hope and expect with Mangrove, it may well be the technology that helps unlock Carolina for us as well,” he said.