Lithium Universe Ltd (ASX:LU7, OTC:LUVSF) has confirmed the viability of its lithium conversion project to produce environmentally friendly, battery-grade lithium carbonate – even in a low pricing environment – with the results of a preliminary feasibility study (PFS) for its Bécancour Lithium Carbonate Refinery in Québec, Canada.
LU7’s proposed refinery will produce up to 18,270 tonnes of green battery-grade lithium carbonate per year using proven expertise from the Jiangsu processing model.
The company plans to source spodumene feedstock from domestic and international markets to produce a battery grade lithium carbonate product to contribute to the North Atlantic lithium supply chain and help close the the Lithium Conversion Gap.
Favourable project economics
The PFS highlights the project's strong financial viability, even under conservative pricing conditions.
Key financial indicators include a pre-tax net present value (NPV8) of around US$779 million, at an 8% discount rate, and a pre-tax internal rate of return (IRR) of 23.5%. The projected payback period is 3.5 years.
The financial model assumes prices of US$1,170 per tonne for spodumene concentrate (SC6) and US$20,970 per tonne for lithium carbonate equivalent (LCE).
The project aims to generate US$383 million in annual revenue, with costs estimated at US$236 million, leading to a US$147 million EBITDA and a 38% gross margin.
The total capital cost is estimated at US$494 million. This cost estimate is based on advanced design specifications from the Jiangsu Lithium Refinery model, ensuring robust financial planning and projection.
A significant milestone for LU7
“The successful completion of our preliminary feasibility study is a significant milestone for the company, especially given that we only launched in August of last year,” said Lithium Universe chair Iggy Tan.
“Early on, we recognised that bridging the lithium conversion gap in North America, leveraging our accumulated lithium expertise and the proven technology from Jiangsu, was a clear and strategic path forward.
“Our counter-cyclical strategy is centred on advancing projects during market downturns, allowing us to strategically position ourselves for growth as the market rebounds.
“We are dedicated to funding and constructing a proven, low-risk lithium conversion refinery in Québec, marking the first step toward establishing Québec as the lithium conversion hub for the Transatlantic region.
“The strong NPV and returns for the project indicate an economically viable project. We will be looking to secure strategic partners at the project level to help fund the project.
"There is significant interest from OEMs with spodumene offtake supply seeking conversion outside of China, and discussions are already underway.
“We are confident that the Bécancour lithium refinery, with an annual capacity of 18,270 tonnes, will emerge as a leader in producing green, battery-grade lithium carbonate.
“The company will advance quickly to complete a definitive feasibility study and finalise offtake partnerships.”
Leveraging counter-cyclical strategy amid market downturn
Lithium Universe is leveraging a counter-cyclical strategy focused on project development during the current lithium price downturn.
The company considers current market conditions to offer an ideal opportunity to develop its Bécancour Lithium Carbonate Refinery. While oversupply has led to a decline in lithium prices, LU7 is optimistic about long-term demand, largely driven by the electric vehicle (EV) and energy storage sectors.
As weaker players exit due to falling prices, LU7 sees the downturn as a chance to advance its projects, positioning itself for future price recovery.
“By advancing our project now, we aim to be well-prepared to capitalise on future growth,” the company stated.
Over the past four years, lithium prices have experienced significant fluctuations, rising over 400% between 2020 and 2022 due to increased demand and supply chain disruptions associated with COVID-19.
By 2023, prices began to stabilise as new mining and refining projects came online.
LU7 believes a rebalancing phase is now underway as major producers, such as Core Lithium and Albemarle, have either slowed or halted operations to manage the oversupply.
LU7 expects prices to recover to more sustainable levels within 12–18 months, though not reaching the record highs seen in 2021–2022. The company believes its strategy will position it for success as the lithium market stabilises.