Funding and Market Risks Loom as Lithium Universe Pushes Québec Refinery Forward

Strong Feasibility Confirms Economic Viability

Lithium Universe Limited (ASX: LU7) has announced a positive Definitive Feasibility Study (DFS) for its Bécancour Lithium Carbonate Refinery in Québec, Canada. The study highlights a pre-tax Net Present Value (NPV) at an 8% discount rate of approximately US$718 million and an Internal Rate of Return (IRR) of 21%, with a payback period of under four years. These figures underscore the project's robust financial fundamentals despite conservative lithium price assumptions.

The refinery is designed to produce up to 18,270 tonnes per annum of battery-grade lithium carbonate, primarily targeting the growing lithium iron phosphate (LFP) battery market. Leveraging proven technology from the Jiangsu Lithium Carbonate Plant in China, the project aims to mitigate operational risks that have plagued other lithium conversion ventures globally.

Competitive Operating Costs and Strategic Location

Operating costs are estimated at US$3,931 per tonne, benefiting from Québec’s abundant and inexpensive green hydroelectric power, priced at approximately US$0.04 per kWh. This cost structure provides a competitive edge over Chinese conversion facilities, which, when factoring in transportation costs, can reach around US$4,525 per tonne for Canadian-sourced spodumene.

Québec’s strategic position as a trans-Atlantic lithium conversion hub is reinforced by its proximity to North American end markets, access to feedstock from Canada, Brazil, and Africa, and favourable trade conditions including tariff advantages under the US Inflation Reduction Act. The project’s location also supports significant greenhouse gas emission reductions, aligning with global sustainability goals.

Advancing Funding and Offtake Discussions

Following the Board’s Financial Investment Decision, Lithium Universe is actively engaging with financial institutions to secure the estimated US$549 million capital required for construction. The company is also in discussions with original equipment manufacturers (OEMs) such as Ford, General Motors, Toyota, and LG Energy Solution to establish offtake agreements based on “take or pay” contracts, designed to reduce market price volatility risks.

This counter-cyclical strategy positions Lithium Universe to capitalize on anticipated lithium price recoveries driven by accelerating electric vehicle (EV) and energy storage demand in North America and Europe.

Strategic Partnerships Enhance Commercial and Innovation Prospects

Lithium Universe has signed a non-binding Memorandum of Understanding (MOU) with Lafarge Canada Inc., part of the Holcim Group, for the exclusive supply of aluminosilicate by-product from the refinery. This additive is expected to improve cement durability and reduce production costs, tapping into Canada’s growing cement industry.

Additionally, a strategic partnership with Polytechnique Montréal aims to foster local expertise in lithium processing technologies, support education and research, and strengthen the Canadian battery materials supply chain. This collaboration aligns with broader efforts to onshore critical mineral processing and innovation.

Focused Project Execution and Portfolio Rationalization

To concentrate resources on the Bécancour project, Lithium Universe has relinquished non-core Canadian tenements including Apollo and Adina. The company is progressing environmental assessments, permitting, and community engagement, including consultations with local First Nations, to ensure sustainable development.

While the company’s cash reserves are modest and expenditures continue, management remains confident in securing additional funding to advance the project, reflecting a disciplined approach to capital management amid the evolving lithium market landscape.