The changing policies of the Australian federal government, with respect to support for research and development, have had an impact on the future plans of Lithium Australia NL (ASX: LIT). As current policies reduce the support provided in developing new technologies, Lithium Australia is overhauling its research and development activities to allow its programs to be expedited.
Despite the additional engineering requirements of resizing the large-scale pilot plant (LSPP) to reduce capital costs, Lithium Australia remains confident that the studies required for commitment to construction of the plant will be complete in the coming quarter. These plans are well advanced.
One of the principal design criteria of any large-scale pilot plant is the incorporation of available industrial components, to ensure operations can be scaled up to commercial capacity with components that have a positive production history with the specified application. This will be of paramount importance in the re-scaling of the LSPP.
Plant location has significant impact on both capital and operating costs. This is not only so with respect to direct costs, but also the R&D assistance packages available and taxation regimes in various jurisdictions. Unfortunately, the Australian jurisdiction is becoming less favourable when compared with many other locations. The location of the LSPP will take into account the principal financial considerations together with intangibles such as the ability to manage R&D in offshore jurisdictions.
The planned reduction of capital exposure has placed Lithium Australia in a position within which the Arena Investors, LP convertible note facility as described in the ASX release dated 1 March 2018 is presently not the optimal funding mechanism for Lithium Australia’s immediate requirements. Consequently, the facility has been terminated in its current form. Lithium Australia continually evaluates the most effective financing options to complement its strategic agenda. It will update the market as appropriate
“Changing our pilot plant strategy, and reducing capital exposure is in the interests of all shareholders,” said Lithium Australia managing director Adrian Griffin. The support of Arena has been very important to our strategy and it is unfortunate that changes in government policy have had such an impact on our research and development plans. We thank Arena for its support and look forward to engaging with it as a key investor in any future relationship.”