Lithium Chile Announces Pre-Tax NPV of US$3,853,000,000 and Pre-Tax IRR of 42.1% from Pre-Feasibility Study on Arizaro Project

2024-07-23

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Results include 20 Year Life Production Rate of 25,000 Tonnes of Battery Grade Lithium Carbonate Per Year and Upgraded Mineral Resource and Reserve Volumes.

CALGARY, ALBERTA – TheNewswire July 23, 2024 – Lithium Chile Inc . (“ Lithium Chile ” or the “ Company ”) (TSX Venture Exchange: LITH OTC-QB: LTMCF) is pleased to announce the successful completion of the Pre-Feasibility Study (“ PFS” ) for its flagship Arizaro Project, located in Salta, Argentina. The PFS, prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101), outlines the project's strong economic viability, environmental sustainability, and long-term operational potential.

HIGHLIGHTS:

Project Location : Salar de Arizaro, Departamento de los Andes, província de Salta, Argentina

Production Capacity: 25,000 tonnes per annum of Battery Grade Lithium Carbonate ( LCE ).

A Life-of-Mine (LOM) duration of 20 years.

Mineral Resource of 4,122,000 tonnes LCE:

Measured Mineral Resource: 261,000 tonnes LCE

Indicated Mineral Resource: 2,237,000 tonnes LCE

Inferred Mineral Resource: 1,624,000 tonnes LCE

Probable Mineral Reserve of 490,000 tonnes LCE

Project Economics:

Pre-tax Net Present Value ( NPV ”) 8% US$M 3,853

Average Li CO price of US$ 30,513

After-tax NPV8% US$M 2,829

Pre-tax Internal Rate of Return ( IRR ”) of 42.1%

After-tax IRR of 36.3%

Pre-tax initial capital payback period 2.5 years ; after-tax payback 2.7 years

Initial Capital Cost ( CAPEX ”) estimated at US$M 1,055

Operating Cost ( OPEX ”) estimated at $5,457/t LCE .

Building upon the success of the Company’s 2023 Preliminary Economic Assessment (“ PEA ”), the PFS further solidifies the Arizaro Project's position as a leading contender in the race for sustainable lithium production. The study is the culmination of a year-long, in-depth engineering and design process, incorporating valuable insights gained from successful 2023 Direct Lithium Extraction (“ DLE ”) pilot plant trials and extensive in-house laboratory testing. The PFS confirms the effectiveness of DLE technology in efficiently extracting lithium chloride from the Arizaro brine, which is then purified and converted into high-quality lithium carbonate (LI 2 CO 3 ).

Enhanced Economic Viability: Stronger Returns Driven by Market Conditions and Argentina's Régimen de Incentivo para las Grandes Inversiones (“RIGI”) Incentives

The Pre-Feasibility Study for the Arizaro Project highlights its strong economic potential, revealing significantly enhanced pre-tax net present value and internal rate of return. These key metrics underscore that the Arizaro Project's is a highly profitable and attractive investment opportunity, as detailed in Table 1.

| Metrics or Target | 2023 PEA | PFS @ PEA Price | PFS RIGI | | Pre-Tax NPV (8%) (US$M) | $1,846 | $1,985 | $3,853 | | Post-Tax NPV (8%) (US$M) | $1,138 | $1,431 | $2,829 | | Pre-tax IRR (%) | 29.3% | 28.1% | 42.1% | | After-tax IRR (%) | 24.1% | 24.4% | 36.3% | | Post-Tax Payback period (years) | 3.6 | 3.7 | 2.7 | | NPV/CAPEX | 1.4 | 1.36 | 2.68 | | OPEX | 5,197 | 5,457 | 5,457 | | Execution schedule duration (months) | - | 22 | 22 |

Table []()1 : Key Metrics & Targets

Key factors contributing to the robust economics of the Company’s PFS:

Favorable Pricing Environment The PFS benefits from a significantly more favorable lithium carbonate price environment according to Benchmark Minerals LCE price forecast compared to the 2023 PEA. The PEA utilized a n average price assumption of USD $21,396 per tonne, while the PFS models an average price of USD $30,513 per tonne, resulting in a substantially improved economic outlook for the project.

Benchmark Minerals stated in their Q2 2024 report that "Our base case view is that the emerging deficit will push lithium carbonate prices to a peak in 2030 before prices retreat to the long-term incentive price of US$29,000/t. These prices will be sufficient to incentivize new supply to catch up with demand”.

This price forecast reflects a more optimistic view of the future lithium market, considering factors like growing lithium demand, the higher cost of new supply, and growing awareness of a potential supply gap.

Figure []()1 : Lithium Carbonate Price, High, Base and Conservative Case US$/t, Real 2024 (PFS )

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Figure []()2 : Lithium Carbonate Price, High, Base and Conservative case US$/t, Real 2023 (PEA)

Optimized Project Parameters and RIGI Incentives: The Company’s PFS incorporates optimizations in project design and operational efficiencies, leading to cost reductions. Additionally, the potential benefits of []()Argentina's RIGI program have been factored into the economic model. The RIGI program offers tax breaks and other incentives for large-scale mining projects, further enhancing the project's profitability.

Upgraded Mineral Resources and Reserves

The Company’s PFS incorporates, for the first time, a mineral reserve estimate, in addition to revised and expanded measured, indicated, and inferred mineral resource estimates, further strengthening the project's foundation.

The PFS reported a maiden measured resource of 261,000 tonnes of LCE, increased the indicated resource by 33% to 2,237,000 tonnes of LCE, and expanded the inferred resource by 13% to 1,624,000 tonnes of LCE, resulting in a total Mineral Resource of 4,122,000 tonnes of LCE.

Furthermore, the study establishes a Probable Mineral Reserve of 490,000 tonnes LCE at 273 mg/L Li. This significant estimate is underpinned by a comprehensive 3D groundwater flow and solute transport model, rigorously calibrated using historical data and a long-term pumping test. The model's accuracy in simulating the aquifer's response to pumping ensures reliable reserve estimations and projects a 20-year mine life with an annual production of 25,000 tonnes of LCE. The reserve estimate encompasses factors such as wellfield design, potential dilution, and lithium recovery during processing, further solidifying the project's substantial potential and long-term viability.

Advanced Processing

Extensive pilot-scale testing conducted by various technology suppliers under the supervision of Lithium Chile and by a qualified person (QP), from Ausenco has confirmed the project's process flowsheet and the selection of key technologies for the PFS, including DLE. These long-duration trials have not only confirmed a remarkable 23% reduction in water usage compared to the 2023 PEA but have also played a crucial role in informing the selection of preferred technology providers for the PFS.

Further, post-DLE analysis has revealed naturally low boron levels in the brine, eliminating the need for a separate lithium carbonate purification step. This streamlined process, validated by both pilot testing and vendor selection, eliminates the need for the lithium carbonate repurification step previously included in the PEA design.

Moving forward, Lithium Chile will continue to collaborate with technology providers to optimize the process flowsheet and ensure that the final design achieves maximum efficiency and performance.

Continued Commitment to Shared Value

In parallel with our technical advancements, Lithium Chile has demonstrated a steadfast commitment to environmental and social stewardship. The Company submitted its Environmental Impact Assessment (EIA) and baseline study in December 2023, displaying our dedication to responsible project development.

Lithium Chile shares a core value of generating mutual benefits for both the Company, and the local communities in which it operates. This commitment is evident in the ongoing engagement with local stakeholders and the investment in community-focused initiatives. A recent highlight of these efforts is the "Tolar Grande Sustentable" project, which has successfully introduced solar cookers, water heaters, and lighting to the community. This project is just one example of Lithium Chiles broader commitment to supporting sustainable development in the region, with additional initiatives focused on education, health, and environmental protection. The Company remains dedicated to fostering positive relationships and contributing to the well-being of the region throughout the project's lifecycle.

Executive Comments

Steve Cochrane , CEO of Lithium Chile, commented on the positive PFS results: "The PFS confirms our initial confidence in the exceptional potential of the Arizaro Project, outlining a clear pathway to large-scale, cost-competitive lithium carbonate production. This achievement is a testament to the unwavering dedication and expertise of our Argentinian team, who have been instrumental in rapidly advancing the project."

José de Castro , Lithium Chile's President of South America, echoed this sentiment, stating, "We are incredibly proud of the outstanding work of our team. Their efforts have not only demonstrated the project's viability but also positioned us to seize the promising opportunities that lie ahead. The Arizaro project's rapid progress, reflected in our increased asset value, is a testament to their commitment and the strong partnerships we have forged with local communities. We remain dedicated to building on this success as we move towards the next step, creating lasting value for all stakeholders.” []()

ARIZARO PROJECT PRELIMINARY FEASIBILITY TECHNICAL DETAILS

Project Overview and the Lithium Carbonate Production

The project considers the production of 25,000 tonnes per year (t/y) of battery grade lithium carbonate (Li2CO3). To meet this objective, a raw brine flow of 64,080 m3/d is required, which is extracted from wells located in the Salar de Arizaro. This brine is then transported to the process plant which, considering shutdowns, has an availability of 85%.

The general process diagram for the Project is divided into three primary areas: brine extraction, chemical plant, and dry product handling.

Brine Extraction: Brine is extracted from multiple wells and collected at a central operations center pond. This approach minimizes the need for extensive pipeline infrastructure. After consolidation at the operations center, the brine is transferred to ponds located near the processing plant, where it is then fed into the production process.

Chemical Plant: An eight-stage chemical plant employs technology to efficiently extract and purify lithium chloride from the brine. Subsequent processes include reverse osmosis, ion exchange, precipitation, evaporation, and carbonation, culminating in the production of high-quality lithium carbonate. The use of reverse osmosis and mechanical evaporation enhances water recovery and contributes to the project's overall water efficiency.

Product Handling: The final stage involves drying, milling or micronizing, and bagging the lithium carbonate, producing either technical or battery-grade products depending on the process.

This integrated approach maximizes resource utilization and minimizes environmental impact, aligning with Lithium Chile's commitment to the development of sustainable and efficient lithium production. To further enhance sustainability, the project has been designed to utilize cogeneration for energy production.

Mineral Resources and Reserves

The updated resource estimate for the Arizaro project consists of Indicated, Inferred and measured resources, and key parameters used for estimation correspond to brine concentration and drainable porosity.

| Resource Category | Brine Volume (m 3 ) | Average Lithium Concentration (mg/L) | In-Situ Lithium Mass (kt) | LCE Mass (kt) | | Measured | 1.88E+08 | 261 | 49 | 261 | | Indicated | 1.39E+09 | 302 | 420 | 2,237 | | Measured + Indicated | 1.58E+09 | 297 | 469 | 2,498 | | Inferred | 8.42E+08 | 362 | 305 | 1,624 |

Table []()2 : Summary of the Resource Estimate for the Arizaro Project (Effective April 3, 2024)

Notes: 1. Kt = ktonnes

2. The conversion factor used to calculate LCE from lithium is based on the molar weight of the elements added to generate LCE. The equation is as follows: Li x 5.3228 = LCE.

3. The cut-off grade for lithium used to report mineral resources is 200 mg/L based on a conservative lithium carbonate price of $8,000 USD per tonne of LCE.

4. The comparison of values may not be exact due to rounding.

5. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The reserve estimate for lithium brine considers the modifying factors of converting Measured and Indicated resources to mineral reserves, including the production wellfield design, future dilution, and recovery of lithium during the processing phase. A calibrated groundwater flow and solute transport model was created to estimate the reserve, as extraction of lithium-rich brine is based on physical pumping from a wellfield. A 3D numerical model was constructed using Groundwater Vistas interface Version 8 and simulated using MODFLOW USG-Transport.

(Years 1 – 20) | 407 | 273 | 92 | 490 |

Table []()3 : Summary of the Probable Reserve Estimate for the Arizaro Project, Considering Processing Losses (Effective April 19, 2024)

Notes: 1. Mm 3 = million cubic meters; kt = kilotonnes; LCE = lithium carbonate equivalent.

2. Mineral Reserves are reported at a point of reference of processed brine using a global recovery factor of 83%.

3. The cut-off grade for lithium used to report Mineral Reserves is 200 mg/L based on a conservative lithium carbonate price of $8,000 USD per tonne of LCE.

4. Lithium is expressed as a contained metal.

5. The conversion factor used to calculate LCE from lithium is based on the molar weight of the elements added to generate LCE. The equation is as follows: Li x 5.3228 = LCE.

6. Minor discrepancies may exist when comparing values d ue to the use of averaging methods and rounding.

Capital Cost (CAPEX)

The base currency for capital cost estimates is the US dollar (USD). The second quarter of 2024 (Q2 2024) is defined as the base date for the estimate.

The estimate was developed with the objective of reaching class 4, based on the definition of the AACE International Recommended Practice No. 47R-11 – “Cost Estimate Classification System”.

A summarized breakdown of the project's capital cost (CAPEX) estimate is provided in table 4, organized according to the Work Breakdown Structure (“ WBS ”). The WBS is a hierarchical decomposition of the total scope of work, dividing the project into smaller, more manageable components. This structured approach facilitates detailed cost estimation, allocation of resources, and effective project management.

| WBS

Lv1 | Description | Initial Capital Cost US$M | Sustaining Capital Cost US$M | Total Capital Cost Project US$M | | 1000 | Brine Extraction | 73.6 | 68.3 | 141.9 | | 2000 | Chemical Plant | 318.0 | - | 318.0 | | 3000 | Dry Product Handling | 16.7 | - | 16.7 | | 4000 | General Utilities | 163.0 | 8.78 | 171.78 | | 5000 | On-Site Infrastructure | 79.0 | - | 79.0 | | Total Direct Cost | 650.3 | 77.08 | 727.3 | | | | Project Indirect Cost (Including First Fills) | 146.6 | 133.03 | 279.63 | | | Owner Cost | 39.0 | - | 39.0 | | Basis of Estimate | 835.9 | 210.11 | 1046.0 | | | | Contingency CAPEX | 218.8 | 35.97 | 254.77 | | Total Cost | 1,054.7 | 246.08 | 1,300.8 | |

Table []()4 : Summary by WBS of cost estimate (CAPEX)

Note: Numbers may not add up due to rounding

Operating Cost (OPEX)

The most relevant direct cost is reagents (52%) followed by energy (22%), both costs add up to US$ 98.8 M/a meaning 74% of the total operating direct cost.

For the operating cost estimate of PFS level, reagents, resin, membrane, fuel and personnel transportation were quoted by Ausenco or Lithium Chile representing 83% of the direct operating cost.

| Description | US$ M/a | US$/t Li 2 CO 3 | | Direct Cost | | | | Reagents | 69.8 | 2,794 | | Resin make-up & Membrane replacement | 6.8 | 270 | | Energy | 29.0 | 1,159 | | Manpower | 8.1 | 323 | | Catering and Camp services | 6.2 | 249 | | Maintenance | 4.9 | 195 | | Site Vehicle Costs | 0.3 | 11 | | Bus – In / Bus – Out transportation | 2.7 | 110 | | Consumables | 0.6 | 25 | | Li 2 CO 3 transport to Antofagasta Port | 5.2 | 208 | | Direct Cost Subtotal | 133.6 | 5,344 | | Indirect Cost | | | | General and Administration | 2.8 | 114 | | Indirect Cost Subtotal | 2.8 | 114 | | PRODUCTION Li 2 CO 3 TOTAL COSTS | 136.4 | 5,457 |

Table []()5 : Operating Cost Estimate Summary

Economic Analysis

An engineering economic model was developed to estimate annual pre-tax and post-tax cash flows and sensitivities of the Project based on an 8% discount rate. It must be noted, however, that tax estimates involve many complex variables that can only be accurately calculated during operations and, as such, the after-tax results are only approximations. Sensitivity analyses were performed to assess the impact of variations in battery-grade lithium carbonate prices, operating costs, and capital costs.

The economic analysis was performed using the following assumptions:

Construction starts January 01, 2026.

Ramp-up production start-up in 2028, with full process plant production achieved in 2030.

Mine life of 20 years.

Cost estimates remain constant in Q2 2024.

No price inflation or escalation factors were considered.

Results are based on 100% ownership.

Capital costs funded with 100% equity (i.e., no financing costs assumed).

All cash flows discounted to beginning of construction January 01, 2026.

All lithium carbonate products are assumed sold in the same year they are produced.

Project revenue is derived from the sale of battery-grade lithium carbonate FOB Antofagasta; and

No binding contractual arrangements currently in place.

The pre-tax net present value discounted at 8% (NPV8%) is US$M 3,853, the internal rate of return (IRR) is 42.1%, and payback is 2.5 years. On an after-tax basis, the NPV8% is US$M 2,829, the IRR is 36.3%, and the payback period is 2.7 years.

Case | | General | | | | | Li 2 CO 3 Price (US$/t) | $30,513 | $32,424 | $27,940 | | Operational Years (years) | 20.0 | 20.0 | 20.0 | | Production - LOM | | | | | Process Efficiency (%) | 83.0% | 83.0% | 83.0% | | LOM Li 2 CO 3 Battery Grade (t/y) | 24,459 | 24,459 | 24,459 | | Full Production Li 2 CO 3 Battery Grade (t/y) | 25,000 | 25,000 | 25,000 | | Total Payable Li 2 CO 3 Battery Grade (t) | 489,178 | 489,178 | 489,178 | | Operating Costs | | | | | Processing Cost (US$/t Li 2 CO 3 ) | $5,267 | $5,267 | $5,267 | | Transport Cost (US$/t Li 2 CO 3 ) | $208 | $208 | $208 | | Total Operating Cost (Processing Cost + Transport Cost) (US$/t Li 2 CO 3 ) | $5,475 | $5,475 | $5,475 | | Cash Costs (US$/t Li 2 CO 3 )* | $6,529 | $6,606 | $6,427 | | AISC (US$/t Li 2 CO 3 ) | $7,165 | $7,242 | $7,063 | | Capital Costs | | | | | Initial Capital (US$M) | $1,055 | $1,055 | $1,055 | | Sustaining Capital (US$M) | $246 | $246 | $246 | | Closure Capital (US$M) | $65 | $65 | $65 | | Financials - Pre-Tax | | | | | Pre-Tax NPV (8%) (US$M) | $3,853 | $4,426 | $3,090 | | Pre-Tax IRR (%) | 42.1% | 49.2% | 33.0% | | Pre-Tax Payback (years) | 2.5 | 2.2 | 3.1 | | Financials - Post Tax | | | | | Post-Tax NPV (8%) (US$M) | $2,829 | $3,258 | $2,256 | | Post-Tax IRR (%) | 36.3% | 42.1% | 28.8% | | Post-Tax Payback (years) | 2.7 | 2.4 | 3.3 | | Table 6: Economic Analysis Summary

Cash costs consist of mining costs, processing costs, G&A, transport cost and royalties | | | | | AISC includes cash costs plus sustaining capital and closure cost | | | |

Sensitivity

A sensitivity analysis was conducted on pre-tax and after-tax NPV and IRR of the Project, using the following variables: battery-grade lithium carbonate price, discount rate, initial capital costs and operating costs.

Lithium Chile Announces Pre-Tax NPV of US$3,853,000,000 and Pre-Tax IRR of 42.1% from Pre-Feasibility Study on Arizaro Project

Earlier from Lithium Chile Inc.