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Clayton Valley Lithium Project, Nevada, USA

Property Tour by CEO Dr. Bill Willoughby of Clayton Valley Project in Nevada

Clayton Valley Lithium Project, Nevada location map

Cypress owns 100% of the Clayton Valley Lithium Project totalling 5,430 acres in southwest Nevada, USA. The Clayton Valley Project is located immediately east of Albemarle’s Silver Peak mine, North America’s only lithium brine operation, which has been in continuous operation since 1966. Exploration and development by Cypress has discovered a large world-class resource of lithium-bearing claystone adjacent to the brine field to the east and south of Angel Island, an outcrop of Paleozoic carbonates protruding up through the lakebed sediments. 

Clayton Valley Lithium Project, Nevada claims map

Lithium mineralization occurs within montmorillonite clays throughout the sediments to a depth of at least 120 meters. Metallurgical testing indicates low cost processing can be achieved by leaching with low acid consumption (125 kg/t) and high lithium recovery over 85% Li. These high extractions prove the dominant lithium-bearing minerals present are not hectorite, a refractory clay mineral which requires roasting and/or high acid consumption to liberate the lithium. 

Lithium Enriched Clay at Clayton Valley Project in Nevada
Lithium enriched claystone at Clayton Valley Project in Nevada

Project Scalability

In August 2020, Global Resource Engineering (GRE) completed an updated Mineral Resource Estimate for the Company's Clayton Valley Lithium Project utilizing the same economic and mining parameters found in the Company's May 2020 Prefeasibility Study (PFS). Measured and Indicated Mineral Resources increased 55% to 929.6 million tonnes averaging 1,062 ppm Li (5.2 Mt LCE) based on a cut-off grade of 900 ppm Li. No changes in the PFS Mineral Reserves, mine design or production schedule have been made at this time.

Cypress believes these features, along with a favorable geographical setting of the resource makes the Clayton Valley Project a premier source that has the potential to significantly impact the production of lithium in the United States.

Positive Prefeasibility Study

In May 2020, Cypress announced positive results from a Prefeasibility Study (PFS) for the Company's Clayton Valley Lithium Project in Nevada. The PFS was prepared by Continental Metallurgical Services (CMS) and Global Resource Engineering (GRE). Todd Fayram (CMS), Terre Lane (GRE), and Daniel Kalmbach are the authors.

Prefeasibility Study for Clayton Valley Lithium Project, Nevada
Prefeasibility Study for Clayton Valley Lithium Project, Nevada

Highlights of Prefeasibility Study:

  • Average production rate of 15,000 tonnes per day to produce 27,400 tonnes lithium carbonate equivalent (LCE) annually over a +40-year mine life.
  • Lithium Carbonate price of $9,500 per tonne.
  • Capital cost estimate of US$493 million, pre-production and operating cost estimate averaging US$3,329 per tonne LCE.
  • After-tax net present value (NPV-8%) of US$1.052 billion at 8% discount rate and 25.8% internal rate of return (IRR).
  • Production based on Probable Mineral Reserve of 222 million tonnes averaging 1,141 ppm Li (1.353 Mt LCE) based on a cut-off grade of 900 ppm Li.
  • Reserves and production plan derived from Measured and Indicated Mineral Resources of 593 million tonnes averaging 1,073 ppm Li (3.387 Mt LCE).

Cypress CEO Dr. Bill Willoughby stated "This PFS is a major milestone for Cypress. These positive results take us closer to our goal of developing a world-class lithium deposit.  Cypress' land position and resources afford us the opportunity for a long-life project with low operating costs and potential to be a significant source of lithium for the United States."

The key features of the lithium claystone deposit include its large size, surface exposure and flat-lying nature. These features allow mining with negligible strip ratio (0.15:1) due to minimal overburden and no interbedded waste, and no drilling or blasting in excavation. Metallurgical testing indicates low-cost processing can be achieved by leaching with low acid consumption (125 kg/t) and high lithium recovery over 85%. Self-generated power from a 2,500 tpd sulfuric acid plant is included in the project's costs.

The project's large resource allows the mineral resources and reserves for the PFS to be derived from a only portion of the property (Initial Pit) showing a mine life of +40 years. All resources and reserves are pit-constrained by property and geologic boundaries, and are based on a cut-off grade of 900 ppm Li.

Clayton Valley Lithium Project, Nevada Prefeasibility Pit Outline Map
Clayton Valley Lithium Project Prefeasibility Pit Outline map

Results for the PFS are:

  • Average annual production of 27,400 tonnes per year LCE
  • Mine life for PFS of +40 years
  • Lithium Carbonate price of $9,500 per tonne
  • Industry-low cash cost of US$3,329 per tonne LCE
  • US$1.052 billion NPV at 8% discount rate, after-tax basis
  • After-tax internal rate of return (IRR) of 25.8%
  • Capex payback period of 4.4 years

Sensitivity to LCE Price

The economic evaluation is reported in terms of LCE using an average price of US$9,500 per tonne. The price assumption reflects variations expected over time due to start-up and pricing for lithium products.

Sensitivity* to Price, Capex, and Opex

Variation

60%

100% Base Case

150%

Price /t LCE
NPV-8%
IRR

$5,700
$130 million
10.5%

$9,500
$1,052 billion
25.8%

$14,250
$2.173 billion
41.1%

Capital Cost
NPV-8%
IRR

$296 million
$1.352 billion
30.1%

$493 million
$1.052 billion
25.8%

$740 million
$673 million
20.0%

Operating Cost
NPV-8%
IRR

$1,997/t LCE
$1.229 billion
39.6%

$3,329/t LCE
$1.052 billion
25.8%

$4,993/t LCE
$828 million
17.9%

* NPV and IRR calculated on an after-tax basis.

Mineral Resources

The May 2020 Mineral Resource Estimate for the PFS was based on all drilling results from the project, including six holes drilled in 2019. The reported Mineral Resource is pit constrained by an “ultimate" pit that extends to the property boundaries and uses slope angles determined from geotechnical study. The Mineral Resources total 432.4 million tonnes averaging 1,088 ppm lithium (Li) in the Measured Resource and 160.9 million tonnes at 1,032 ppm Li in the Indicated Resource, for a total of 593.3 million tonnes at 1,073 ppm Li in Measured and Indicated Resources (3.387 Mt LCE). The constrained pit shell contains mostly Measured and Indicated tonnes, with only 2.3 million tonnes of Inferred Resource averaging 1,005 ppm Li.

Mineral Resource Estimate (May 19, 2020)

Domain

Resource
Mt

Li
 (ppm)

Measured

Tuffaceous mudstone

19.6

1,062

Claystone all zones

412.0

1,089

Siltstone

0.9

974

Total

432.4

1,088

Indicated

Tuffaceous mudstone

14.5

1,043

Claystone all zones

146.2

1,031

Siltstone

0.20

963

Total

160.9

1,032

Measured + Indicated

Tuffaceous mudstone

34.1

1,054

Claystone all zones

558.2

1,074

Siltstone

1.1

972

Total

593.3

1,073

Inferred

Tuffaceous mudstone

0.1

933

Claystone all zones

2.2

1,009

Siltstone

0.0

0

Total

2.3

1,005

Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources will be converted into Mineral Reserves. Inferred Mineral Resources are that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity.

Mineral Reserves

The May 2020 Mineral Reserves for the PFS were derived from the Measured and Indicated Resources. Within the resource shell, the first eight of 16 designed production phases were used to construct a mine schedule with 40 years. The cumulative result for the production schedule forms the Mineral Reserves.

Mineral Reserve Estimate (May 19, 2020)


Classification

Mt

Li
(ppm)

LCE
 (Mt)

Probable Reserves (*Note 8)

Total

222.8

1,141

1.353

  1. The effective date of the Mineral Reserve Estimate is May 1, 2020. The QP for the estimate is Ms. Terre Lane of Global Resource Engineering Ltd. and is independent of Cypress Development.
  2. The Mineral Reserve estimate was prepared with reference to the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards (2014 CIM Definition Standards) and the with generally accepted Canadian Institute of Mining's (CIM) “Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (November 29, 2019).
  3. Mineral Reserves are reported within the pit design at a mining cutoff of 900 ppm Li.
  4. The cutoff of 900 ppm Li is an optimized cutoff selected for the mine production schedule.
  5. The Mineral Reserves are included in and derived from the Mineral Resources.
  6. Reserves are estimated based on delivery to the mill stockpile.
  7. No inferred resources are included in the Mineral Reserves or given value in the economic analysis.
  8. All Measured and Indicated Mineral Resources within the mine production schedule are classified as Probable Reserves. No Measured Resources are converted to Proven Reserves due to Modifying Factors. Modifying Factors may include mining, processing, metallurgical, economic, marketing, legal, environmental, infrastructure, social and governmental factors. In the opinion of the authors, Modifying Factors apply to the project. As a source of lithium, sedimentary-hosted clay, claystone or ash-derived deposits are a new class of deposit. As of this report, there are no operations or projects in the world at a large enough scale to say that the extraction of lithium for this class is commercially proven.

Production Plan

Mining and processing are based on a daily rate of 15,000 tpd of mill feed. Material will be mined by a track excavator and transported using semi-mobile feeder-breaker and conveyors. The stripping ratio is 0.15:1.

Lithium in the deposit is associated with illite and smectite clays. The lithium is amenable to leaching with dilute sulfuric acid leach followed by filtration, solution purification, concentration, and electrolysis to produce high-purity lithium.

Lithium Enriched Drill Core from Clayton Valley Project, Nevada

Lithium enriched drill core from Clayton Valley Project, Nevada

Metallurgical work by CMS determined optimum conditions for leaching including time, acid concentration, and temperature. Tests show only minor differences occur with respect to sample depth, oxidation, or weathering state of the clays.

Large leach tests were performed on samples to provide slurry for rheology, filtration, and lithium recovery testing. The tests yielded average results of 86.5% extraction of lithium into solution and 126.5 kg/tonne for acid consumption.

Filtering Leach Solution from Clayton Valley Lithium Project, Nevada

Filtering Leach Solution from Clayton Valley Lithium Project, Nevada

Testing was conducted to determine a commercial means of solid-liquid separation. Specific conditions and equipment were identified. Solids from filtration tests simulating the final circuit were generated. The solids following single stage washing are suitable for handling by conveyor to a conventional dry-stack tailings facility.

NORAM Engineering and Constructors Ltd. and CMS designed and tested the flowsheet for recovering the lithium from solution. Testing was completed in March 2020 and report received in May 2020. The NORAM-CMS test program was successful in yielding a purified concentrated lithium solution suitable for the production of high-purity lithium hydroxide (LiOH).

Capital and Operating Costs

Capital and operating costs were estimated from vendor quotes, internal data and public information. The initial capital costs are estimated at US$493 million, including US$95 million in contingency (at 20%) plus working capital.  Operating costs are estimated to average US$16.78/tonne, or $3,329/tonne LCE.

Capital Cost Estimate

Area

US$ x 1000

Facilities

5,891

Mine

34,757

Plant

306,855

Infrastructure

25,907

Owners Costs

24,992

Contingency

94,883

Total Capital Cost

493,284

Operating Cost Estimate

Area

Avg Annual
US$ x 1000 

Mill feed
US$/t

Mining

9,932

1.83

Processing

77,735

14.30

G & A

3,550

0.65

Total Operating Cost

91,218

16.78

Acid plant operations are a major component in the operating costs and account for one third of the total operating cost based on a delivered cost of US$145 per tonne for sulfur. The acid plant has capacity to generate 93% of the power required by the operation and will have surplus power available when the operation is running. No allowances are made in the operating cost estimates for potential power sales or offsets.

The project has the potential to recover other by-products in addition to lithium including rare earth elements, most notably scandium, neodymium and dysprosium, that were identified in solution, and alkali salts. No values are given in the PFS for any by-product elements as these are still conceptual in nature.

Project Advancement

Interview with CEO Dr. Bill Willoughby, PE of Cypress Development – July 2020

The Prefeasibility Study supports further work with the recommendation to conduct a pilot plant study and initiating a feasibility study and permitting. The Company intends to invite proposals that can add value to the project and Cypress through financial, technical, operating or marketing capabilities. Cypress Development is advancing its Clayton Valley Project in Nevada towards the production of high-purity lithium hydroxide (LiOH) suitable for tier one EV battery usage.

Lithium Enriched Clay at Surface at Clayton Valley Project, Nevada
Lithium enriched claystone on surface at Clayton Valley Project, Nevada

Sustainability and the Environment

The Clayton Valley Project has the potential to be a sustainable long-term low-cost producer of lithium with direct benifits for both Nevada and the United States. Key features of the lithium claystone deposit include its large size, surface exposure and flat-lying nature. These features allow mining with negligible strip ratio of 0.15:1 due to minimal overburden and no interbedded waste, and no drilling or blasting in excavation. Metallurgical testing indicates low-cost processing can be achieved by leaching with low acid consumption.

The initiation of field studies is included in the May 2020 Prefeasibility Study recommendations and baseline environmental studies for the Clayton Valley Project are underway. A Phase I Environmental Site Assessment of the Project was conducted in 2019 and found no existing environmental liabilities. A Threatened and Endangered Species Preliminary Study was also completed.

Lithium Enriched Clay at Clayton Valley Project in Nevada
Lithium enriched claystone at Clayton Valley Project in Nevada

Environmental permitting requirements for the Clayton Valley Project are expected to be like other mines in Nevada. The permitting process consists of submitting a Plan of Operations to the Bureau of Land Management, who will act as lead agency, conducting environmental baseline studies, and preparing an Environmental Impact Statement along with other permit applications prior to site development and operations. The time frame for permitting the Clayton Valley Project is estimated at 18 to 24 months.

Cypress Development is committed to creating value for all stakeholders, including the environment and communities around us, through sustainable and responsible mining.

Mining Infrastructure in Clayton Valley, Nevada

  • Well maintained state highways connect Silver Peak to the main road network in Nevada
  • Nevada has fostered a thriving mining industry with associated development expertise, construction and operations services and a mature regulatory environment
  • Single best mining jurisdiction in the U.S. and ranked 3rd globally by the respected "Fraser Institute's annual Survey of Mining Countries"
  • Graded and maintained gravel roads link Silver Peak to the southern half of Clayton Valley
  • Nearest rail system is in Hawthorne, Nevada, approximately 90 miles by road
  • Public use airport in Tonopah with two runways
  • Electrical connection is possible at the sub-station in Silver Peak
  • Water supply is currently served by the Silver Peak municipal water supply

Lithium Timing and Why Now?

The global energy storage revolution is generating high demand for new sources of lithium (Li) with analysts forecasting significant demand increases for lithium carbonate and lithium hydroxide used in the production of lithium-ion batteries. Electric vehicles (EV) and grid energy storage are becoming a huge demand driver for lithium-ion batteries and the need for more lithium production. Battery giants and major automakers world-wide are scaling up battery production with mega-factories and are actively acquiring lithium through off-take and joint-venture agreements.

Lithium Demand Forecast by Benchmark Minerals

Lithium Demand Forecast by Benchmark Minerals

Increasing battery production is driving demand for increasing lithium production with the completion of a US$5 billion large-scale lithium-ion battery gigafactory near Sparks, Nevada. Supply of lithium for the Tesla (NASDAQ: TSLA)Panasonic battery gigafactory should come from Nevada due to tax incentives received of US$1.3 billion over 10 years. There are over 150 large-scale battery mega-factories world-wide in the planned production pipeline to 2028 (Benchmark Minerals) and are based on lithium-ion batteries becoming an all purpose energy storage unit that are highly scalable.

Mining companies already producing lithium are attempting to increase their production through acquisition and joint-venture agreements. Rockwood Holdings was purchased by Albemarle (NYSE: ALB) in 2014 for US$6.2 billion. The purchase included the Silver Peak lithium mine located in Clayton Valley, Nevada.

Albemarle Silver Peak (Rockwood Lithium) Mine Complex, Clayton Valley, NevadaAlbemarle Silver Peak Lithium Mine Complex in Clayton Valley, Nevada

With the United States producing less than 2% of the world's lithium, the U.S. Government has designated Lithium (Li) as a “Critical Mineral” of strategic importance to the Nation’s economic and national security. The policy of the U.S. Government is to reduce the Nation's vulnerability to disruptions in the supply chain of critical minerals. The “Critical Mineral” designation favors domestic sources of lithium that offer a secure, reliable source of supply. The size of the resource makes Cypress' Clayton Valley Project a premier source that has the potential to significantly impact the supply of lithium that is produced in the United States.

Lithium Uses

The most important use of lithium is in rechargeable batteries for electric vehicles, home, business and grid storage systems, mobile phones, laptops and other consumer electronics. Lithium is also used in some non-rechargeable batteries for things like heart pacemakers, toys and clocks.

There is a very good reason why lithium in batteries has become the metal of choice. Lithium is the most reactive metal known, also the lightest, with an atomic number of 3. Used in batteries, lithium provides much better energy per volume ratio or energy density than an ordinary alkaline battery or other common rechargeable battery such as a nickel-metal hydride. This is in part because lithium is the third-smallest element after hydrogen and helium, and thus a lithium ion can carry a positive charge in a very small amount of space. Lithium-ion batteries can be recharged by running the anode and cathode reactions in reverse and the ability to be recharged many times over without much loss of capacity is another major advantage of the lithium-ion battery.

Lithium metal (Li) is also made into alloys with aluminium and magnesium, improving their strength and making them lighter. A magnesium-lithium alloy is used for armour plating. Aluminium-lithium alloys are used in aircraft, bicycle frames and high-speed trains.

Lithium oxide is used in special glasses and glass ceramics. Lithium chloride is one of the most hygroscopic materials known, and is used in air conditioning and industrial drying systems (as is lithium bromide). Lithium stearate is used as an all-purpose and high-temperature lubricant. Lithium carbonate is used in drugs to treat manic depression, although its action on the brain is still not fully understood. Lithium hydride is used as a means of storing hydrogen for use as a fuel.

William Willoughby, PhD, PE, Director & CEO of Cypress Development Corp. is a Qualified Person as defined by National Instrument 43-101 and has approved the technical information on this web site.



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