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Clayton Valley Lithium Project, Nevada

From Drilling to PEA in under 2 Years

Cypress' flagship Clayton Valley Lithium 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. Recent exploration by Cypress has discovered an extensive deposit 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. 

Lithium Enriched Claystone at Clayton Valley Project, NevadaLithium Enriched Claystone at Clayton Valley Project, Nevada

Cypress controls two claim blocks, Dean and Glory, totalling approx. 5,700 acres. Lithium mineralization occurs within montmorillonite clays throughout the sediments to a depth of at least 120 meters. Metallurgical tests have shown the claystone is weak acid leachable with lithium extractions over 80% in 2 to 8 hours in agitated leach tests using sulfuric acid. These high extractions indicate the dominant lithium-bearing minerals present are not hectorite, a refractory clay mineral which requires roasting to liberate the lithium. 

Cypress believes these features, along with a favorable geographical setting and the size of the deposit makes Clayton Valley a premier target that has the potential to impact the future of lithium production in North America. With lithium mineralization tested by drilling over a seven-kilometer trend, Cypress’ Clayton Valley Project could develop into a significant long-term source of supply in a politically stable and favorable mining jurisdiction. 

In September 2018, Cypress announced positive results from a Preliminary Economic Assessment (PEA) of the Company’s Clayton Valley Lithium Project. The PEA was prepared by Global Resource Engineering (GRE) of Denver, Colorado, an independent engineering services firm with extensive experience in mining and mineral processing. 

GRE reported an updated total Indicated Mineral Resource of 3.835 million tonnes of lithium carbonate equivalent (LCE) contained in 831 million tonnes at an average grade of 867 ppm Li and an Inferred Mineral Resource of 5.126 million tonnes of LCE contained in 1.12 billion tonnes at an average grade of 860 ppm Li. The Clayton Valley deposit remains open at depth with 21 of 23 drill holes ending in lithium mineralization.

GRE used a conventional approach in processing and developed a production schedule that utilized only a small fraction of the total resources on the property. The result is a project that has strong economics and the potential to generate significant cash flow. 

PEA Highlights:

  • Net present value of $1.45 billion at 8% discount rate and 32.7% internal rate of return on after-tax cash flow.
  • Lithium carbonate price of $13,000 per tonne based on Benchmark Research market study.
  • Average annual production rate of 24,042 tonnes of lithium carbonate over 40-year life.
  • Operating cost estimate averaging $3,983 per tonne of lithium carbonate.
  • Capex payback period of 2.7 years. 

PEA Summary:

After tax cash flow analysis (US Dollars)
Internal rate of return (IRR) 32.7%
Net present value (NPV-8%) $1.45 billion
Payback period 2.7 years
Operating rate 15,000 tpd for 40 years
Capital cost estimate $482 million over 2 years
Net lithium recovery 81.5%
Base case price for lithium carbonate $13,000/tonne
Average production lithium carbonate 24,042 tonnes
Operating cost for lithium carbonate $3,983/tonne

Sensitivity of Base Case to Lithium Price

Price for lithium carbonate NPV-8% ($ Million) IRR
$4,800/tonne - break-even --- 0
$8,000/tonne (-38%) 433 16.4
$10,500/tonne (-19%) 947 25.0
$13,000/tonne - base-case 1,454 32.7
$15,500/tonne (+19%) 1,960 40.0
$18,000/tonne (+38%) 2,467 46.8

Resources:

The PEA includes an updated Mineral Resource Estimate, which followed upon changes in the resource model and property boundaries since the May 1, 2018 Resource Estimate. For the PEA, GRE created an ultimate pit shell for the property-wide resources, and an initial pit shell that focused on the higher-grade clay units in the eastern part of the property. Estimation methods follow those in the previous report. 

Resources - Property-Wide Pit Shell

Cut-off grade
Li ppm
Indicated Inferred
Tonnes
(million)
Li
ppm
Tonnes LCE
(million)
Tonnes
(million)
Li
ppm
Tonnes LCE
(million)
300 831.0 867 3.834 1,120.3 860 5.125
600 768.5 892 3.649 1,022.2 888 4.831
900 319.7 1,091 1.857 430.3 1,082 2.478

Resources - Initial Pit Shell

Cut-off grade
Li ppm
Indicated Inferred
Tonnes
(million)
Li
ppm
Tonnes LCE
(million)
Tonnes
(million)
Li
ppm
Tonnes LCE
(million)
300 365.3 942 1.832 160.5 992 0.847
600 361.3 946 1.820 158.5 997 0.841
900 198.0 1,105 1.164 106.8 1,119 0.626

CIM definitions were followed for Mineral Resources. 

The mineral resources are reported using a cut-off grade of 300 ppm Li and are constrained to a pit shell reflecting a $17.50/tonne operating cost, $13,000/tonne of LCE price, and 81.5% net recovery to LCE. Both property-wide and initial pit shells use a 30-degree pit slope.

Mining and production schedule:

A 15,000 tonne per day nominal production rate was selected based upon the projected output for the operation, with the goal of producing over 20,000 tonnes per year of lithium carbonate. The nominal production rate equates to 5.475 million tonnes per year of mill feed at an average grade of 1,012 ppm Li. Further improvement in the production schedule is possible given the resources in the initial pit alone far exceed the 219 million tonnes of production needed to support a 40-year mine life.  

Clayton Valley Lithium Project Initial Pit Plan View

Clayton Valley Lithium Project Initial Pit Plan View

GRE evaluated four options for mine equipment and mill feed transportation and selected an in-pit feeder-breaker with slurry pumping for the base case. No drilling or blasting is required, and the only major piece of mobile equipment is a front-end loader to feed the in-pit feeder-breaker. Waste mining is minimal, amounting to a total of 6 million tonnes over the 40-year mine life.

Processing: 

The plant design by GRE includes agitated tank leaching, and a multi-stage thermal-mechanical evaporation system for concentrating leach solution. Slurried feed is transported to the mill where lithium extraction is achieved through leaching at elevated temperatures with dilute sulfuric acid. The sulfuric acid concentration is targeted at 5%, with the addition of concentrated acid delivered from the on-site acid plant. 

The estimated acid plant capacity is 2,000 tonnes per day of sulfuric acid, generated from the combustion of elemental sulfur trucked to the site in the molten state. The acid plant has the potential to produce up to 25 MW of electricity, but at additional capital expense. For this study, only enough electricity will be generated to run the acid plant. Steam from the plant will be used for heating in the leaching and evaporation stages of processing. 

Cypress Conceptual Clayton Valley Lithium Mine Plan ViewConceptual Clayton Valley Lithium Mine Plan View

Leaching will take place in a primary leach vessel followed by a series of thickeners. Retention time in the leach circuit is estimated at 4 to 6 hours with acid consumption estimated at 125 kg per tonne of feed. Overflow from the final leach thickener is pumped to a primary impurity removal circuit where calcium hydroxide is added to precipitate iron and aluminum, and the thickened underflow filtered and conveyed to a dry-stack tailings facility. The purified solution is reduced in volume via a multi-stage thermal-mechanical evaporation system where evaporate is collected and recycled as process water, and the condensate is treated by stage-wise addition of sodium hydroxide and soda ash to precipitate calcium, manganese and magnesium before advancing to final product production. Precipitation of the final product occurs with the addition of soda ash, producing a lithium carbonate product targeted at 99.5% purity. Net recovery of lithium throughout processing is estimated at 81.5%.

Cypress Conceptual Clayton Valley Lithium Process Flow SheetConceptual Clayton Valley Lithium Process Flow Sheet

Process water for the operation will be obtained by recycling barren leach solution after treating in a reverse osmosis plant, and by introducing fresh make-up water, estimated at 345 m3/hour and delivered via pipeline from a well field located off-site. 

Capital Costs:

The total initial capital cost estimate is $482 million distributed over two years of pre-production. An overall factor of 2.86 on equipment costs is used to allow for the necessary installation labor, construction materials, spares, first fill, buildings, and engineering and construction management. Infrastructure and G&A capital includes allowances for feasibility study, permitting, bonding, off-site electrical, and acquisition of process water. 

Capital Cost (USD Millions)
Mine development and equipment 35
Plant feed prep, leaching, purification and lithium recovery 163
Acid plant 105
Tailings 25
Site utilities 17
Infrastructure and G&A capital 38
Direct Capital Costs 383
Working capital 24
Contingency (20% of Direct Costs) 76
Indirect Capital Costs 99
TOTAL CAPEX 482

Operating Cost Estimate: 

Estimated operating costs are $17.50 per tonne of mill feed, or $96 million per year, including 10% contingency. Acid plant operations are the major component in the operating costs and account for more than half of the total. Project labor is estimated at 136 on-site employees. Connected power is estimated at 12 MW, with an all-in cost of $0.066 per KWH.

Operating Cost $ per tonne
of mill feed
$ per tonne
of LCE
Mining 1.73 395
Plant labor 1.45 330
Reagents & supplies 12.70 2,893
Power 0.94 210
G & A 0.68 155
TOTAL OPEX 17.50 3,983

Global Resource Engineering of Denver, Colorado, prepared the National Instrument 43-101 Technical Report which carries an Effective Date of September 5, 2018. Terre A. Lane, J. Todd Harvey, Hamid Samari, and J. J. Brown of GRE, and Todd Fayram of Continental Metallurgical Services are the Qualified Persons for the report. 

The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

View Full GRE Report: NI 43-101 PEA Technical Report 

Project Advancement:

In October 2018, Cypress announced a Prefeasibility Study (PFS) was underway for the project with results anticipated in Q1 2019. The PFS will include infill drilling to upgrade resource categories and optimize the mine production schedule within the initial pit area. Metallurgical testing will include determining optimum leach conditions and configuration of the process plant as well as further testing to demonstrate the production of high purity lithium carbonate suitable for battery usage.

Testing is also underway to investigate rare earth elements, most notably scandium, neodymium and dysprosium, that were identified in solution during the PEA and could be potentially recoverable by-products.

Cypress Clayton Valley Lithium Project, Nevada location map

Lithium-Rich Claystone at Surface at Clayton Valley Project, Nevada Lithium-rich claystone at surface at Cypress' Clayton Valley Project

Sampling Lithium-Rich Claystone at Surface at Clayton Valley Project, NevadaSampling lithium-rich claystone at Cypress' Clayton Valley Project

Lithium-Rich Claystone Discovered at Cypress Glory Clayton Valley Project, NevadaLithium-rich claystone at Cypress' Clayton Valley Project

Lithium 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 energy storage revolution is generating high demand for lithium with analysts forecasting continuing demand increases for the product (Li). Electric vehicles and energy storage have become a huge demand driver for lithium and for increased production. Battery giants around the world are scaling up lithium-ion production with mega-factories and are actively acquiring the raw material through off-take and joint-venture agreements.

Tesla (NASDAQ: TSLA) and increasing lithium demand are driving exploration in Nevada with the construction of a $5 billion USD Gigafactory, a large-scale lithium-ion battery facility outside of Sparks, Nevada. Supply of lithium for the Tesla and Panasonic battery gigafactory should come from Nevada due to major State tax incentives Tesla received ($1.3 billion USD in tax incentives over 10 years). Additional large-scale lithium-ion battery factories are under construction around the world and are based on the potential of lithium batteries becoming an all purpose energy storage unit that are highly scalable.

Companies already producing lithium are attempting to increase their production. Rockwood Holdings was purchased by Albemarle (NYSE: ALB) in 2014 for $6.2 billion USD. The purchase included the Silver Peak Lithium Brine 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 only 3% of the world's lithium, in December 2017, the U.S. Government designated Lithium as a “Critical Mineral” of strategic importance. The “Critical Mineral” designation favors domestic sources of lithium across the supply chain. The new policy of the U.S. Government is to reduce the Nation's vulnerability to disruptions in the supply chain of critical minerals.

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 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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