Announcement PDF BÉCANCOUR LITHIUM REFINERY DEFINITIVE FEASIBILITY STUDY FEBRUARY 2025 HIGHLIGHTS The Lithium Universe Strategy • Positive, robust Bécancour Refinery DFS even in low pricing environment • LU7 Board has made Financial Investment Decision (FID) and proceeding to funding • LU7 has a counter cyclical strategy – develop project, ready for price recovery • Closing the Lithium Conversion Gap – growth in resource and end market projects The Financial Modelling • Economically viable with excellent pre-tax NPV8% of approximately US$718M • IRR (pre-tax) of approximately 21.0% and payback of 3.9 years based on; • Price forecast of US$1,170/t SC6 and US$20,970/t for battery grade Li2CO3 • Current spot price is approx. US$775/t SC6 and US$10,680/t for battery grade LC • Operating costs at around US$3,931/tonne; • Capital cost estimate of US$549 million • 11% increase from PFS mainly due to Zero Liquid Discharge (ZLD) system and escalation • Expected annual revenue of approx US$383 million and EBITDA of around US$148 million • Project break even at around US$740 /t (SC6) and around US$14,000 per tonne LC The Design • LU7 offers a solution to worldwide lithium conversion failures and startup problems • Using proven Jiangsu Refinery operating technology and lithium industry experience • Producing up to 18,270 tonnes/year of green battery-grade lithium carbonate • Smaller off-the-shelf style plant rather than large difficult-to-operate facilities • Initial focus on lithium carbonate production – feed for LFP batteries • Assumptions based on real operating data and experience – not new aspirant The Location • Québec ideal trans-Atlantic lithium conversion centre, comparable to China • Feedstock from Canada, Brazil and Africa – end market North America • Critical cost benefits – cheap green power, transport mine/end market savings, US/Canada tariffs • 95% GHG emission reduction with Hydro Québec’s green energy Next Steps • Offtake discussions with interested OEMs underway • LU7 to embark on the funding stage of the project Lithium Universe Limited ASX:LU7 ABN 22 148 878 782 Suite 9, 295 Rokeby Road Subiaco WA 6008 Australia www.lithiumuniverse.com investorhub.lithiumuniverse.com 2 CAUTIONARY STATEMENTS Information Required by Listing Rules The Bécancour Lithium Refinery Definitive Feasibility Study (DFS) does not rely upon estimated ore reserves / and or mineral resources. The spodumene concentrate feedstock for the proposed refinery has been assumed to have been purchased directly from spodumene miners currently producing spodumene concentrates or marketing agents or traders currently purchasing spodumene concentrate and selling to the downstream processors. Accordingly, the JORC Code is not relevant to this study nor are Listing Rules 5.16 and 5.17 to the extent to which they relate to matters concerning JORC. Forward Looking Statements This release contains “forward-looking information” that is based on the Company’s expectations, estimates and projections as of the date on which the statements were made. This forward-looking information includes, among other things, statements with respect to studies, the Company’s business strategy, plan, development, objectives, performance, outlook, growth, cash flow, projections, targets and expectations. Generally, this forward looking information can be identified by the use of forward-looking terminology such as ‘outlook’, ‘anticipate’, ‘project’, ‘target’, ‘likely’,’ believe’, ’estimate’, ‘expect’, ’intend’, ’may’, ’would’, ’could’, ’should’, ’scheduled’, ’will’, ’plan’, ’forecast’, ’evolve’ and similar expressions. Persons reading this news release are cautioned that such statements are only predictions, and that the Company’s actual future results or performance may be materially different. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information. Forward-looking information is developed based on assumptions about such risks, uncertainties and other factors set out herein, including but not limited to general business, economic, competitive, political and social uncertainties; the actual results of current development activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of metals; failure of plant, equipment or processes to operate as anticipated; accident, labour disputes and other risks of the chemical industry; and delays in obtaining governmental approvals or financing or in the completion of development or construction activities. This list is not exhaustive of the factors that may affect our forward-looking information. These and other factors should be considered carefully, and readers should not place undue reliance on lithiumuniverse.com such forward-looking information. Neither the Company, nor any other person, gives any representation, warranty, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statement will actually occur. Except as required by law, and only to the extent so required, none of the Company, its subsidiaries or its or their directors, officers, employees, advisors or agents or any other person shall in any way be liable to any person or body for any loss, claim, demand, damages, costs or expenses of whatever nature arising in any way out of, or in connection with, the information contained in this document. The Company disclaims any intent or obligations to or revise any forward-looking statements whether as a result of new information, estimates, or options, future events or results or otherwise, unless required to do so by law. Cautionary Statement The DFS is based on the material assumptions outlined including that it has been completed to a Class 3 level with a nominal level of accuracy of -15% and +20%, that the financial forecasts rely upon the purchase of third party spodumene concentrate as the feedstock for the plant. The DFS referred to in this announcement has been undertaken to assess the potential technical feasibility and economic viability of constructing and operating facilities capable of producing battery grade lithium carbonate for use in lithiumion batteries from those units of operations and provide baseline financial metrics to consider future investment decisions. The Definitive Feasibility Study (DFS) is based on the material assumptions outlined below. These include assumptions about the availability of funding. While Lithium Universe considers all of the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the DFS will be achieved. To achieve the range of outcomes indicated in the DFS, funding of in the order of US$550 million will likely be required. Investors should note that there is no certainty that Lithium Universe will be able to raise that amount of funding when needed. It is also likely that such funding may only be available on terms that may be dilutive to or otherwise affect the value of Lithium Universe’s existing shares. It is also possible that Lithium Universe could pursue other ‘value realisation’ strategies such as a sale, partial sale or joint venture of the project. If it does, this could materially reduce the Company’s proportionate ownership of the project. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the DFS. 3 CONTENTS Executive Summary ............................................................................................... 5 Chairman’s Comments .......................................................................................... 5 Counter Cyclical Strategy ..................................................................................... 6 Company’s Outlook On Supply Demand Outlook .............................................. 7 Closing The Lithium Conversion Gap ................................................................. 8 Quebec Trans Atlantic Lithium Conversion Centre ........................................... 9 Margins Of Converters Vs Concentrate .............................................................. 10 Global Lithium Conversion Failures & Challenges ............................................ 11 Jiangsu Uses A Conventional Process From 1950’s ......................................... 12 Use Of Proven Jiangsu Technology .................................................................... 13 Solving The Technology Risk .............................................................................. 14 Proven Expertise ................................................................................................... 15 Initial Focus On Lithium Carbonate Production ................................................. 17 Lithium Market Demand ........................................................................................ 18 Lithium Price Forecast .......................................................................................... 19 Long Term Spodumene And Lithium Carbonate Price Assumptions ............... 20 Bécancour Site Location ....................................................................................... 22 Bécancour Flow Sheet ........................................................................................... 26 Patent Application Process ................................................................................... 26 Plant Layout ............................................................................................................ 29 Process Reagents And By-Product Production .................................................. 32 Metallurgical Testwork ........................................................................................... 34 Canadian Resource Development ........................................................................ 36 Transatlantic Resource Development .................................................................. 37 Offtake Discussions ............................................................................................... 38 Capital Cost Estimate ............................................................................................ 39 Capital Costs Intensity .......................................................................................... 43 Economic Analysis ................................................................................................ 43 Break Even Scenario, Current Lithium Prices ..................................................... 45 Operating Cost Estimate ....................................................................................... 46 Sensitivity Analysis ............................................................................................... 48 Project Finance ...................................................................................................... 49 Environmental, Sustainability And Governance ................................................. 50 Government And Community Relations .............................................................. 52 Partnership With Local University ....................................................................... 54 Logistics Agreement ............................................................................................. 54 Project Risk Management ..................................................................................... 55 Next Steps .............................................................................................................. 58 Addendum .............................................................................................................. 59 4 EXECUTIVE SUMMARY Lithium Universe Limited (“Lithium Universe” or the “Company,” ASX: “LU7”) is pleased to announce the results of its Definitive Feasibility Study (DFS) for the Bécancour Lithium Carbonate Refinery in Québec, Canada. The Company previously released a Preliminary Feasibility Study in October 2024. The follow-up DFS confirms the viability of a strong lithium conversion project, even within a below-average pricing environment. The Company plans to build a reliable, lowrisk lithium conversion refinery with an annual capacity of up to 18,270 tonnes, utilizing proven expertise from the Jiangsu processing model. The facility will produce environmentally friendly, battery-grade lithium carbonate. The Company aims to establish a Canadian-based lithium chemicals business, purchasing spodumene feedstock from both domestic suppliers and international markets, including Brazil and Africa and producing a battery grade lithium carbonate product. This aligns with the Company’s broader vision of contributing to the North Atlantic lithium supply chain and closing the Lithium Conversion Gap. The project’s economics continues to be highly favourable, even with conservative price assumptions. The refinery is economically viable with a pre-tax Net Present Value (NPV) of approximately US$718 million, using an 8% discount rate, and a pre-tax Internal Rate of Return (IRR) of around 21.0%. The full rate payback period is estimated at 3.9 years. The financial model is built on cautious price forecasts of US$1,170 per tonne for spodumene concentrate (SC6) and US$20,970 per tonne for battery-grade lithium carbonate equivalent (LCE). LU7’s directors believe they have a reasonable basis for using the assumed price in the study of US$20,970 per tonne for battery grade lithium carbonate. Key operational assumptions include 86% plant availability and 88% lithium recovery. At full production capacity, the project is expected to generate approximately US$383 million in annual revenue, with costs totalling around US$236 million, leading to an annual EBITDA of approximately US$148 million and a gross margin of in the region of 39%. Post-tax, the NPV at an 8% discount rate is estimated at approximately US$449 million. The capital cost for the project is estimated at US$549 million, which includes a contingency of US$51 million. The capital cost has risen by 11% compared to the PFS, primarily driven by the inclusion of a Zero Liquid Discharge (ZLD) system (US$30 million) to enable the recycling and reuse of all process water on-site. Additional factors, such as escalation and updated pricing quotes, also contributed to this modest increase. The capital costs estimate is based on advanced design specifications from the Jiangsu Lithium Refinery model, ensuring robust financial planning and projection. These factors highlight the project’s strong financial viability, even under conservative pricing conditions. Chairman’s Comment Lithium Universe Chairman, Iggy Tan said “The strong NPV and returns for the project indicate an economically viable project and the Board has made the Financial Investment Decision (FID), and the project is now proceeding to the funding stage. An equity and debt adviser will be engaged to lead the funding outreach program, aimed at securing strategic partners at the project level to support project financing. Initial discussions with various banks and debt providers have been encouraging. The Company will continue discussions with interested OEMs with spodumene offtake supply seeking conversion outside of China. 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. We recognized that bridging the lithium conversion gap in North America, leveraging our accumulated lithium expertise and the proven technology from Jiangsu, is a clear strategy.” “Our counter-cyclical strategy is centered 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.” WATCH: Members of the Lithium Universe and Hatch Engineering team discuss the Definitive Feasibility Study (14min) lithiumuniverse.com 5 COUNTER CYCLICAL STRATEGY Leveraging experience with cyclical movements in the lithium market, Lithium Universe utilizes a counter-cyclical strategy focused on developing projects during market downturns to strategically position itself as the market recovers. Although the recent oversupply of lithium has resulted in price declines, the Company remains confident in the strong long-term demand for lithium, driven by the growing electric vehicle (EV) and energy storage sectors. This ongoing demand underscores the need for continued investment in lithium mining and refining projects. LU7 believes that the current market conditions provide an optimal window for project development. With falling and depressed prices, less viable projects and weaker players have been cleared out of the market, leaving space for more robust and well-prepared companies. By advancing its Bécancour Lithium Carbonate Refinery during this downturn, LU7 aims to be ready for a price recovery and capitalize on future growth, ensuring its place in the evolving lithium market. Over the past four years, lithium prices have experienced significant fluctuations due to the expanding electric vehicle (EV) market and increased demand for energy storage. From 2020 to early 2022, prices surged as supply struggled to keep pace with demand driven by the global shift towards cleaner energy. By 2022, lithium carbonate and hydroxide prices had risen over 400%, influenced by COVID-19-related supply disruptions. As of late 2023, prices have begun to stabilize due to new mining and refining projects. Although recent oversupply has led to price declines, long-term demand for lithium remains strong, necessitating continued investment in mining and refining. COMPANY’S COMMENTARY ON SUPPLY DEMAND OUTLOOK The lithium market is currently experiencing a rebalancing phase driven by oversupply and strategic production curtailments by major producers. In response to recent price declines, several key players have either reduced output or temporarily halted operations. Companies such as Core Lithium, the Greenbushes JV, Mineral Resources, and Albemarle’s Kemerton facility have all implemented measures to manage supply. More recently, CATL’s Yichun mine and Arcadium’s Mt Cattlin operation have also scaled back production. Additionally, the Tianqi Kwinana lithium hydroxide plant has been placed under care and maintenance, reflecting broader industry trends aimed at stabilizing the market. These strategic adjustments highlight the industry’s efforts to balance supply with demand dynamics, potentially paving the way for a healthier market recovery in the future. The Company believes that in the next 12 to 18 months, the lithium supply-demand balance is poised for significant rebalancing. LU7 believes that lithium prices will correct faster than expected due to supply-side pressures. Historically, the lithium market tends to over-correct when prices decline, largely due to the dynamics of oversupply and the purchasing behaviour of the Chinese lithium industry. The prevailing mindset during periods of price reduction is, “Why buy today when you can buy later at a cheaper price?” This leads to significant cuts in inventory levels, which can drop to unsustainable lows. However, when prices begin to recover, the opposite behaviour occurs. Anticipating further price increases, Chinese buyers rush to secure lithium and stockpile inventory. This reaction drives demand beyond the natural market requirements, causing prices to rise even further. This cycle of price-driven buying perpetuates further price hikes, as companies continue to purchase more in anticipation of future shortages, fuelling even greater upward momentum in lithium prices. The Company believes the impact of lithium supply cuts is being significantly underestimated. Analysts project a 17% reduction this year and a 21% next year in annual reduction in supply, based on announced shutdowns. Additionally, low lithium prices have delayed or slowed the start of new projects and existing ramp-ups. Anecdotal evidence indicates that many Chinese lithium conversion plants, built during the boom, are now reducing operations or shutting down entirely due to a lack of spodumene feedstock. The Company anticipates that this will trigger another supply shortage. There’s also a risk that companies may cut back too aggressively in response to low prices, further tilting the balance into a dramatic supply deficit. lithiumuniverse.com 6 On the demand side, the Company believes that the underlying demand for lithium is being underestimated. Analysts tend to focus on EV sales growth, sometimes just Europe and USA, as it is readily available data, but often overlook key trends. Notably, the growth of EVs in China has been underestimated. The penetration rate of EVs in China surged from 6% in 2020 to 40% in just four years, a pace that caught many Western analysts off guard. China’s EV exports have also skyrocketed, rising from $3 billion in 2020 to $35 billion per annum today. In addition, the production of electric buses and trucks by Chinese companies is not sufficiently tracked. Most Tier 1 Chinese cities now run predominantly electric buses, and 85% of taxi fleets in China are EVs. Importantly, an electric bus can use 5 to 6 times more battery capacity than a passenger EV. Another area with significant demand potential is electric trucks. A projected penetration rate of 0.5 million electric trucks by 2030 would equate to the battery capacity of 5 million EVs, as electric trucks require roughly 10 times more battery capacity than passenger EVs. This hidden demand is expected to put additional strain on lithium supply. A major factor often overlooked in demand forecasts is the rapid expansion of battery energy storage systems (BESS), which is emerging as a “dark horse” in the market. Two significant changes have reshaped the industry. First, the price of solar panels has plummeted due to production overcapacity, reaching rock-bottom levels. Second, with the surge in renewable energy generation, particularly solar power, electricity prices often turn negative during daylight hours due to the excess supply. This year alone, 600 GW of solar farms were installed, and this number is expected to increase to 800 GW annually. To make these solar farms economically viable, BESS is essential to store the excess energy generated during the day and shift it to the night-time peak period. Based on new capacity installations, around 1.6 TWh of BESS will be required annually to support the growing solar infrastructure. This growing demand for BESS adds another layer of pressure to the lithium supply, further amplifying the supply-demand imbalance. The Company believes that as lithium supply continues to diminish and demand from both EVs and BESS accelerates, the market is on the verge of a severe shortage. This shortage will likely drive prices up even more sharply. With supply already constrained by shutdowns and delays in new projects, coupled with growing demand across multiple sectors, the anticipated supply-demand imbalance could materialize sooner than expected. This imbalance may lead to a more dramatic and intense price correction, as the market struggles to meet the rapidly increasing need for lithium across both the EV and energy storage sectors. LU7’s counter-cyclical strategy focuses on developing projects during market downturns, allowing the company to capitalize when the market rebounds. By advancing projects when others are scaling back due to low prices, LU7 positions itself to benefit from a tighter supply market and rising prices when demand recovers. This approach helps the company stay ahead of competitors, secure favourable terms for project development, and ensure readiness to meet future demand when the market conditions improve. lithiumuniverse.com 7 CLOSING THE LITHIUM CONVERSION GAP Currently, over 90% of global LFP battery manufacturing is concentrated in China, but North America is rapidly expanding its capacity. Ford plans to build a $3.5 billion factory in Michigan with an annual capacity of 35 gigawatt-hours (GWh) by 2026, while Tesla is developing a facility in Nevada with a 10 GWh capacity focused on improving charging speed and energy density. LG Energy Solutions is investing $5.6 billion in Arizona to produce LFPs for energy storage systems and EVs. By 2028, North America is expected to add nearly 1,000 GWh of battery manufacturing capacity, supporting the production of 10 to 13 million electric vehicles annually. Key states like Georgia, Kentucky, and Michigan will lead this growth. Canada is also investing in the sector, with partnerships from Volkswagen, Stellantis, and others, helping to secure its position in the global automotive market and meet the rising demand for EVs. The Company estimates that 850,000t of LCE per annum will be required to satisfy demand in North America by 2028. Spodumene concentrate needs to be converted to battery-grade lithium carbonate or hydroxide to be used in the production of cathode materials for lithium batteries. Currently, there are no operational converters in North America and the Company estimates only 100,000t of LCE hard rock converters are slated for development in the region by 2028. It is unsure how many of them will be successful. The region seeks to decrease dependence on Chinese lithium converters, aligning with both commercial and national security goals to onshore the lithium battery supply chain in North America. The Company believes that there is a shift in the Canadian government’s stance concerning the export of critical lithium spodumene concentrate to other countries, particularly China, for downstream processing of battery-grade lithium carbonate and lithium hydroxide. In late 2022, the government ordered Sinomine, a Chinese state-owned company, to divest from Canadian company Power Metals Corp to relinquish its spodumene concentrate off-take contract. The government stated that the decision was made following a comprehensive “multi-step security review” conducted under the Investment Canada Act. Canadian lithium developers must now provide a downstream solution. In 2024, the U.S. is set to significantly increase tariffs on key Chinese exports, aiming to reduce dependency on Chinese supply chains and enhance domestic production capabilities. Among the targeted materials are lithium carbonate (Li2CO3) and lithium hydroxide (LiOH), critical inputs for battery production, with tariffs rising to 25%. This marks a significant escalation from the previous rates, reflecting the focus of the US on securing strategic resources. These measures are part of a broader effort to address supply chain vulnerabilities and bolster local industries. lithiumuniverse.com 8 QUÉBEC TRANS ATLANTIC LITHIUM CONVERSION CENTRE The Company believes Québec is emerging as an ideal trans-Atlantic hub for lithium conversion, offering a strategic alternative to China. With feedstock readily available from Canada, Brazil and Africa, Québec is well-positioned to supply the growing North American market. Its competitive edge lies in access to low-cost, green energy priced at just US$0.04 per kWh, making the lithium refining process both cost-effective and sustainable. The US Inflation Reduction Act (IRA), European Battery Passport, and Canadian critical minerals mandates are expected to reshape the North American battery market by encouraging domestic production and reducing reliance on Chinese suppliers. Québec’s close proximity to lithium-rich regions such as James Bay, home to 500Mt of +1% Li2O deposits, and major spodumene producers in Latin America and Africa, enhances its competitive position in the global market. The shift towards Canadian domestic production is also driven by the need for compliance with Canadian Security regulations, which strengthens supply chain security and market competitiveness. Additionally, Québec’s location near major electric vehicle (EV) and energy storage manufacturers in Canada reduces transportation costs and carbon emissions, making it a critical player in the lithium supply chain. As North American demand for EVs and energy storage systems continues to rise, ensuring a reliable domestic lithium supply is essential. Expanding lithium conversion capabilities in Canada not only enhances supply chain security but also supports regional battery manufacturing, economic growth, and global clean energy goals, while reducing the environmental impact associated with long-distance material transportation. Figure 1: Electricity prices in Trans-Atlantic Region lithiumuniverse.com 9 MARGINS OF CONVERTERS VS CONCENTRATE There is often a misconception on the profit margins received by converters compared to spodumene producers. The company contends that due to the challenges in establishing successful lithium operations and limited capacity to produce battery-grade lithium, converters also experience similar margins as miners. A prime example showcasing this is Tianqi Corp, which owns the Jiangsu Lithium Carbonate plant and procures spodumene from the market. Tianqi’s ownership of 25% in Greenbushes also reports similar margin levels for both their converter and concentrate businesses in 2021 and 2022, as illustrated in the table below. In both years, the reported margins for their chemical business are very similar to those of their spodumene business. This indicates that the profitability of lithium conversion is just as attractive as minin