The recent decline in the underlying prices of various lithium raw materials, including spodumene, lithium hydroxide and lithium carbonate, is not worrying London-listed Savannah Resources chairperson Matthew King too much.

In fact, if projections by commentators, such as Roskill, of a market deficit and price recovery in 2020 prove to be correct, Savannah’s Mina do Barroso project, in Portugal, will come on line at an “ideal time”, King said in a letter to shareholders on Thursday.

“We view the recent volatility in the lithium sector as symptomatic of the changes in its supply and demand dynamics over the short term.

“We believe that the outlook for lithium prices remains positive in the medium and long term with demand driven by ever tightening emissions legislation, the public's growing concern regarding climate change and the reducing cost of ownership of electric vehicles.”

The Mina do Barroso project is expected to start production in the second half of 2021, which Savannah believes will allow it to benefit from the expected improvement in the market.

The company will deliver a definitive feasibility study (DFS) in the second quarter of next year.

The timeframe for the DFS has been extended from a previous target of early 2019, to allow for additional work to be completed. The additional work stems from the discovery and subsequent delineation of new orebodies, which meant that drilling campaigns had to be extended, mine designs needed to be reworked and pit sequencing plans had to be revised.

The project’s metallurgical test work programme has also been expanded, not only to include samples from the newly discovered deposits, but also to evaluate all ore types which would be treated in the light of the processing challenges reported by the first wave of new spodumene producers in Australia over the past year.

King reported that commercial interest in Mina do Barroso continued to grow and that the company had advanced discussions with a number of potential offtake partners, ranging from established lithium processors to large-scale end-users, such as automotive manufacturers.

Political interest in the project has also increased as appreciation has grown for the strategic role that Mina do Barroso could play in anchoring a new lithium industry in Europe, and Portugal in particular.

“Our team is regularly engaged with the Portuguese administration up to and including Ministerial level, and we have also strengthened our relationships with various EU agencies regarding funding and other forms of support for the project.”

The capital estimate from the scoping study of $109-million to $124.6-million remained a "realistic range", King said, adding that the firm believed it could secure the funds through a combination of project finance debt, EU/government funding, offtake-related/partner financing and royalty financing.