REG - Savannah Resources - Barroso Lithium Project Update

Savannah ResourcesAnnouncement

06/09/2023 07:00

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RNS Number : 4777L  Savannah Resources PLC  06 September 2023

 

 

 

6 September
2023

Savannah Resources Plc

(AIM: SAV, FWB: SAV and SWB: SAV) ('Savannah', or the 'Company')

 

Barroso Lithium Project Update

 

Savannah Resources Plc, the European lithium development company, is pleased
to provide an update on several key workstreams at its 100% owned Barroso
Lithium Project (the 'Project') including, its ongoing commercial
negotiations, completion of the Definitive Feasibility Study ('DFS'), the
environmental licencing process ('RECAPE'), and land purchasing and land
access arrangements.

 

Highlights:

·    Commercial arrangements for the Project:

o  Savannah has a strong negotiating position as it owns 100% of the Project
and has yet to commit to any offtake arrangements

o  Following the endorsement of the Project (the 'DIA') by the Portuguese
environmental regulator, the level of strategic partnership interest in the
Project has increased notably

o  The Company is currently working to identify a shortlist of potential
strategic partners which are willing to assist with the financing of the
Project's construction

o  Savannah expects to provide an update on the Project's commercial
arrangements towards the end of the year

·    DFS and RECAPE: Significant progress has been made on preparations
for the commencement of both the DFS and RECAPE with six tenders issued, 4
tenders awarded and 2 tenders under final review

·    DFS:

o  DFS Processing Work Package: awarded to a collaboration between the plant
construction experts Sedgman Pty Ltd ('Sedgman') and the processing experts
Minsol Engineering Pty Ltd ('Minsol')

o  DFS Infrastructure Work Package: tenders under final review

o DFS Drilling Programme Phase 1: awarded to EDASU S.L ('EDASU') and SPI S.A.
('SPI'); drilling is expected to begin in mid-September on land owned by
Savannah

·    RECAPE:

o  Barroso Lithium Project RECAPE contract: awarded to Quadrante Engenharia e
Consultoria, S.A. ('Quadrante')

o  Bypass Road RECAPE contract: tenders under final review

o Ongoing stakeholder consultation work: Completion of Social Impact
Assessment, tender awarded to Community Insights Group PTE LTD ('Community
Insights')

·    Savannah expects to complete the environmental licencing and the DFS
in the second half of 2024

·    Land acquisition & access arrangements:

o  To date Savannah has acquired or is in the process of acquiring
approximately 45% of the private land it requires for the Project from more
than 40 local landowners.

o  In total, Savannah expects to spend approximately €5M 1  on the
acquisition of private land identified to date which is required for the
Project

o  The Company has also made offers to two relevant community land management
groups ('Baldios') for long term access to community lands required for the
Project and associated compensation to community members. The Company estimate
these offers would total approximately €10M(1) over the life of the Project

o  The Company will always seek to reach mutually acceptable agreements with
all landowners and Baldios groups as it progresses the Project.

 

Savannah's Chief Executive Officer, Dale Ferguson said, "As the summer in
Europe draws to a close, Savannah is completing its preparations for the next
phase in the development of the Barroso Lithium Project. The Project contains
the largest JORC compliant spodumene resource in Europe making it hugely
strategic in the continent's plans for a domestic lithium battery value chain.
Savannah owns 100% of the Project meaning the Company is fully leveraged to
the potential value that can be created by advancing the Project in this
supportive environment.

 

"Savannah is pleased to have received significant commercial interest in the
Project for several years now and following the endorsement of the DIA and the
completion of the new positive Scoping Study, there has been additional
interest generated from across the lithium value chain. With the visibility we
now have on the end of the licencing process and completion of the DFS, it is
the right time to also create an effective commercial structure around the
Project. Our focus is on identifying partners which can assist us in financing
the capital expenditure requirement of the Project and bring complementary
skills or additional opportunities to a long-term partnership with Savannah.
Our discussions with a large range of groups continue and we are currently
working to identify a shortlist of potential strategic partners. We expect to
provide an update on this front later in the year.

 

"Regarding our ongoing work on licencing and technical aspects of the Project,
we are encouraged by the number and quality of the proposals which we have
received from the six tenders for the RECAPE and DFS work, which has enabled
us to build a team of first-class consultants primarily based in Portugal. We
are pleased that two key consultants who contributed to the positive DIA from
the Portuguese environmental regulator in May, Quadrante and Community
Insights, will again be on the team to help us through the final stages of the
Project's licencing.

 

"It is also a pleasure to be continuing our association with Minsol, which has
led on our metallurgical test work programme since 2021 and produced the final
design of the process flowsheet. Drilling groups EDASU and SPI have also both
worked on the Project before and we look forward to restarting our
partnerships with them as we undertake the outstanding drilling required for
the DFS from mid-September onwards. We expect to make the remaining contractor
appointments for the DFS infrastructure and RECAPE bypass road work packages
in the coming weeks.

 

"Given some recent press commentary on the subject, we thought it useful to
clarify our position for all stakeholders and shareholders around land
ownership and land access in relation to the Project. As many will know we
have been purchasing land from local people via a transparent and rigorous
process since 2021. To date we have purchased, or are in the process of
purchasing 70 hectares, or approximately 45% of the total privately owned land
we have identified as required for the Project from more than 40 local
landowners. In addition, Savannah has purchased, or is in the process of
purchasing, a further 23 hectares of ground adjacent to the Project, making
total land acquired or being acquired in the area to date, 93 hectares. We
have also made offers for the provision of access to land managed on behalf of
the community by two relevant Baldios groups. In total, over the life of the
Project, we estimate our land access proposal to the Baldios groups will total
approximately €10M, with approximately €4M being payments directly to
community members.

 

"The 30-year Mining Lease granted in 2006 safeguards Savannah's access to land
that may be necessary for the development of the Barroso Lithium Project.
Despite the existing legal coverage, Savannah will always favour direct
agreement with landowners and representatives of the Baldios. The Company will
use the mechanisms provided in Portuguese law but only when it is not possible
to reach an agreement. Savannah wants to build the Barroso Lithium Project
with the community, to benefit its members, not to impact them.

 

"With much going on we now look forward to providing regular news flow during
the remainder of the year including on the RECAPE and DFS work programmes we
are about to start, the commercial opportunities around the Project and
additions to the Savannah team."

 

Further Information

 

Following the award of the DIA for the Company's proposed development of the
Barroso Lithium Project in May 2023, focus has now moved to the finalisation
of the DFS which is now possible as the site layout was completed as part of
the DIA approval process and the finalisation of the RECAPE. During July and
August, Savannah has been running a series of tenders to support the works
required to complete both the DFS and the RECAPE which include:

 

·    DFS Processing Work Package (Awarded)

·    DFS Infrastructure Work Package (Tenders under final review)

·    DFS Drilling Programme (Phase 1 awarded)

·    Barroso Lithium Project RECAPE (Awarded)

·    Bypass Road RECAPE (Tenders under final review)

·    Completion of Stakeholder Impact Assessment (Awarded)

 

Summaries of the DFS and RECAPE tenders awarded to date and the Company's land
acquisition activities and land access proposals are provided below.

 

DFS Processing Work & Infrastructure Work Packages

Savannah has completed the tendering exercise for the DFS processing work
package which includes the final design of the Processing Plant, detail
forecasts of the CAPEX and OPEX for the processing plant (+/-15%) and a scope
of work for the Project's Implementation. Following the review of the tender
proposals received, based on a high level of lithium processing experience,
competitive cost, and plan to carry out much of the work using teams based in
the Iberian Peninsula, this work package was awarded to a collaboration
between Sedgman and MinSol, subject to final negotiation of the contract.

 

The DFS work for the key project infrastructure was the subject of a second
tender process which is now nearing completion with the final assessment of
tenders received now underway.

 

About Sedgman

Sedgman is an Australian engineering company with a global presence in the
minerals and metals sector. Their 250-strong portfolio of high-performing
processing plants and supporting mine-site infrastructure showcases the value
of their specialist focus. Since 1980, they have advanced the standard of
excellence and innovation in design, delivery, and operations of processing
facilities for their clients. Sedgman is a subsidiary of the Australian
company, CIMIC Group, which in turn is owned by HOTCHTIEF, which is majority
owned by ACS Group. In executing the DFS Sedgman will draw on the regional
project delivery expertise of DRAGADOS, another ACS Group company, based in
Spain.

 

About Minsol

MinSol is a Western Australian based resource development consultancy,
specialising in mineral and chemical processing facilities and associated
infrastructure.

 

The core engineering team at MinSol have been integral to the development of
the lithium industry for more than 15 years, including implementation of the
world's first dedicated spodumene flotation plant for lithium chemical
conversion (2008) as well as major projects for the likes of Talison Lithium
(Greenbushes) and Tianqi Lithium (Kwinana). MinSol has contributed to the
design, implementation, and commissioning of numerous projects which now have
a combined production capacity of 1.7Mtpa (SC6.0), or circa 50% of Australia's
current spodumene production capacity.

 

MinSol have been involved in the Barroso Project for nearly 3 years, having
worked collaboratively with the Savannah team since 2021 to develop the
metallurgical test work and Studies.

 

DFS Drilling

 

Phase 1 of the DFS drilling programme which includes 60 reverse circulation
('RC') and Diamond drill holes is focused on upgrading existing resources,
providing further samples for metallurgical test work and geotechnical
drilling for the final open pit designs and is due to get underway around
mid-September. Subject to the final negotiations of contracts the drilling has
been split between EDASU (RC Drilling) and SPI (Diamond Drilling) and is
expected to take around 2-3 months to complete.

 

About EDASU

EDASU S.L. (Española de Aguas Subterráneas) was created in 1980 as a
groundwater collection company using direct rotary percussion vertical
boreholes. They have more than 40 years of experience in drilling services
mainly in the field of mining and hydrogeology both on the Iberian Peninsula
and internationally and specialises in deep drilling and large diameters.

 

About SPI

SPI S.A. (Sondeos y Perforaciones Industriales de Bierzo S.A.) are an
experienced Spanish drilling company who has been in the exploration sector
for almost 20 years, participating in many projects in the Iberian Peninsula.

 

RECAPE

The RECAPE is the Detailed Design Environmental Compliance Report phase of the
environmental licencing process and will be developed with the objective of
demonstrating the environmental compliance of the detailed design of the
Barroso Lithium Project, regarding the measures/conditions established in the
DIA. Savannah ran a tender process for the scope of works for the Project's
RECAPE and has selected Quadrante who are a highly experienced Portugal based
consulting group and were the same group who helped Savannah guide the DIA to
a successful conclusion and subsequent approval.

 

The RECAPE work for the bypass road was the subject of a second tender process
which is now nearing completion with the final assessment of tenders received
now underway.

 

About Quadrante

Quadrante is a global Engineering, Architecture, Environment and
Sustainability Services Group, with offices in three continents (Europe,
Africa and Latin America) and extensive experience in Special Projects,
Transports Infrastructures, Energy and Industry, Buildings and Urban
Development, Waste and Water Utilities, Environment and Construction
Management and Supervision. Services provided by Quadrante Group range from
Environmental Management Planning, Strategic Environmental Assessments, and
specific studies that integrate the environmental licensing of projects and/or
accompany the various phases of a project: Environmental Due Diligence,
Environmental Feasibility Study, Environmental Impact Studies, Environmental
Compliance Report of the Execution Project, and Environmental Monitoring.

 

Ongoing Stakeholder Consultation Works

Following the approval of the DIA in May 2023, the permitting authority
requested several additional elements for Savannah to present in relation to
stakeholders as part of the RECAPE process. Savannah has now selected
Community Insights Group to provide support in responding to two elements (M31
and M32) relating to the Project's interaction with local communities and
stakeholders. Work is due to commence later in September and take around 8
months to complete.

 

About Community Insights Group

Community Insights is a consultancy who helps businesses build healthy
relationships with their stakeholders. CIG does this by helping them to gain
trust, show respect for human rights, and share benefits with local
communities.

 

Land acquisition and land access arrangements

To develop the Project, Savannah must either own or have agreed access rights
to the land which is to be developed. Due to the distance of the Project from
the communities in the area, there is no requirement to purchases any houses
or other buildings from local people for the Project to progress. Nor is there
a requirement for any resident to leave their home. All agreements and
proposed agreements relate only to land.

 

From an extensive mapping exercise, Savannah estimates that the total area of
land that is required for the Project, spread across the Mining Lease, the
proposed road, and ancillary areas is approximately 840 hectares (8.4km(2))
with private landowners holding around 24% of the total. The remainder is
managed on behalf of the community by management groups ('Baldios'). The land
is spread across 4 parishes.

 

Savannah is committed to responsible land management and will be
comprehensively rehabilitating, relandscaping and revegetating impacted areas
during the operating life of the Project (beginning in the second year of
operation) and after it closes. At the end of the Project's life, the land
will be returned to the community for its own use.

 

Land acquisition

Since 2021, Savannah has been operating a land acquisition programme. To date
more than 40 private landowners have sold, or agreed to sell, their land to
Savannah. Savannah offers landowners €2 or €2.5/m(2) depending on the type
of land (forest or farmland, respectively). Savannah's analysis shows that
these rates are approximately twice the market price for such land in this
region. To date Savannah has acquired, or is in the process of acquiring over
90 hectares of land in the local area and has paid approximately €1.8m
(including relevant taxes). Based on the attractive rates which Savannah is
offering, prior to mine construction the Company expects to spend
approximately €5m in total on the acquisition of land identified to date,
with the money going directly to local people. Further investment on private
land will depend on matters including the progress of private property
identification and the completion of agreements.

 

Land Access

Savannah has engaged with the local Baldios communities from Covas do Barroso
and Dornelas, and presented financial proposals (also included as part of the
EIA submission to APA) to access the Baldios lands. Savannah has offered a
rental value of €335 per hectare/year, a figure which is based on the
current contract Savannah has with the Covas do Barroso Baldios
(€258/hectare/year) adjusted for inflation. The Company has benchmarked this
figure against other relevant land access agreement and transactions in
Portugal and believes it to be a highly attractive figure. For its total
financial proposal, Savannah has added to the land access fee calculated from
this unit price (on which an assumed inflation rate is added), a royalty
linked to the volume of spodumene concentrate production and compensation for
drilling platforms. Savannah is also offering direct payments to all the
community members in the impacted parishes, will provide compensation for
anyone losing agricultural grants as a result of the Project, and provide
financial support for the local firefighters. Overall, Savannah estimates it
would pay approximately €10M for access to the community lands managed by
the Baldios over the Project's life, with approximately €4M being paid
directly to community members. Furthermore, where practical, community members
and the Baldios groups shall be able to access the land during the operation
of the Project for recreation and work, even though Savannah commits to paying
rent for the full area of the Project's mining licence area and ancillary
land.

 

Savannah remains open to discussions with private landowners, Baldios
representatives, and other stakeholders around its land acquisition programme
and land access proposals. The Company's preferred option is to secure the
land or access to the land it needs to develop the Project through direct
negotiation and agreement.

 

The 30-year Mining Lease granted in 2006 safeguards Savannah's access to land
that may be necessary for the development of the Barroso Lithium Project. This
condition applies to both private land and land managed by the representatives
of the Baldios. Despite the existing legal coverage, Savannah will always
favour direct agreement with the owners of the lands and representatives of
the Baldios. The Company will use the mechanisms provided in Portuguese law
but only when it is not possible to reach an agreement.

 

 

Regulatory Information

This Announcement contains inside information for the purposes of the UK
version of the market abuse regulation (EU No. 596/2014) as it forms part of
United Kingdom domestic law by virtue of the European Union (Withdrawal) Act
2018 ("UK MAR").

 

Savannah - Enabling Europe's energy transition.

 

**ENDS**

Follow @SavannahRes on Twitter

Follow Savannah Resources on LinkedIn

 

 

For further information please visit www.savannahresources
(https://www.savannahresources.com/) .com or contact:

 

 Savannah Resources PLC                                                 Tel: +44 20 7117 2489

 Dale Ferguson, CEO


 SP Angel Corporate Finance LLP (Nominated Advisor & Joint Broker)      Tel: +44 20 3470 0470

 David Hignell/ Charlie Bouverat (Corporate Finance)

 Grant Barker/Abigail Wayne (Sales & Broking)

 RBC Capital Markets (Joint Broker)                                     Tel: +44 20 7653 4000

 Farid Dadashev/ Jamil Miah

                                                                        Tel: +44 20 3757 4980

 Camarco (Financial PR)

 Gordon Poole/ Emily Hall / Fergus Young

 LPM (Portugal Media Relations)                                         Tel: +351 218 508 110

 Herminio Santos/ Jorge Coelho

 

 

About Savannah

 

Savannah Resources is a mineral resource development company and sole owner of
the Barroso Lithium Project in northern Portugal.

Savannah is focused on the responsible development and operation of the
Barroso Lithium Project so that its impact on the environment is minimised and
the socio-economic benefits that it can bring to all its stakeholders are
maximised. Through the Barroso Lithium Project, Savannah can help Portugal to
play an important role in providing a long-term, locally sourced, lithium raw
material supply for Europe's rapidly developing lithium battery value chain.
Production is targeted to begin in 2026, producing enough lithium for 0.5m
vehicle battery packs per year.

 

The Company is listed and regulated on AIM and the Company's ordinary shares
are also available on the Quotation Board of the Frankfurt Stock Exchange
(FWB) under the symbol FWB: SAV, and the Börse Stuttgart (SWB) under the
ticker "SAV".

 

 1 Costs are in line with those set out in the Scoping Study announced on 12
June 2023

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