15 December 2016
ASX / TSX ANNOUNCEMENT
Positive scoping studies confirm 17,500 tonne per annum lithium carbonate expansion for Olaroz Lithium Facility in Argentina
Lithium carbonate equivalent (LCE) production will be expanded from the current 17,500 tonnes per annum (tpa) capacity to 35,000 tpa with commissioning targeted for late 2018/early 2019
Capital expenditure for the additional 17,500 tpa of lithium carbonate capacity is circa US$190 million (including a US$25 million contingency) and is expected to be financed through a combination of project finance and Stage 1 operating cashflows
Construction of a 10,000 tpa battery grade lithium hydroxide plant is being investigated with the preferred location being in Japan. Additional capital expenditure is expected to be circa US$30 million before potential government incentives. Financing of this development is expected to include debt and/or offtake financing
Following site visits, five engineering firms have been pre-qualified for the Olaroz lithium carbonate expansion, and three specialist engineering firms have been preselected to undertake work on the lithium hydroxide plant
Orocobre Limited (ORE:ASX, ORL:TSX) (Orocobre or the Company) provides the following update into studies conducted for the Stage 2 expansion of the Olaroz Lithium Facility.
A number of different expansion options were assessed focusing on the production of both lithium carbonate and lithium hydroxide using either conventional and non-conventional technologies and combinations of technologies with different rates of production. The Stage 2 expansion strategy has considered product market conditions, processing risk, capital costs and potential returns.
The key results of the studies were:
There are key strategic advantages to add lithium hydroxide to the Orocobre product range to feed the growing demand in the battery sector
The preferred location for a lithium hydroxide plant is Japan in order to be close to, or integrated with, cathode manufacturers servicing the growing electric vehicle sector
Only existing conventional processing technologies will be used in the expansion. All unconventional technologies reviewed carried a significant level of process risk and were not seen to hold any commercial advantage over conventional technologies
Stage 2 is expected to be fully funded by project debt and internal project cashflows
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Stage 2 will entail the construction of a 17,500 tpa lithium carbonate production facility adjacent to the Stage 1 operations at Salar de Olaroz, in northern Argentina. The expansion is expected to include both Primary and Purification circuits capable of producing battery grade lithium carbonate. In addition, studies continue into construction of a 10,000 tpa lithium hydroxide plant, with a preferred location in Japan facilitating integration into production of cathode for battery manufacture.
Capital Requirements
The Stage 2 capital cost is estimated to be US$190 million including a US$25 million contingency for construction of a 17,500 tonne lithium carbonate facility.
If a lithium hydroxide plant is constructed in Japan, the approximate capital cost will be US$30 million before any government incentives.
It is expected that the funding of both developments will involve project debt (circa 70%) and operating cashflow from Stage 1. In addition, a lithium hydroxide plant based in Japan is likely to be eligible for offtake financing and government incentives.
Orocobre does not anticipate the need to raise equity capital to finance either the Stage 2 expansion or lithium hydroxide plant.
Operating Costs
Stage 2 operating costs for battery grade lithium carbonate production are expected to be similar to Stage 1, which are currently circa US$3,500 per tonne and forecast to decrease to US$2,500 per tonne in FY18.
Timing
The process to obtain the necessary permits and approvals for Stage 2 has commenced and will run concurrently with engineering and design work.
Orocobre and its joint venture partners expect to reach a final investment decision by mid-2017. Stage 2 commissioning is planned to commence in late 2018/early 2019, which aligns with a projected undersupply of lithium chemicals in global markets.
Orocobre is the first new brine based producer of lithium carbonate to emerge in approximately 20 years.
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