The boards of Orocobre (TSX: ORL; ASX: ORE) and Toyota Tsusho Corp. have given the green light to building the Naraha lithium hydroxide plant, which will be the first of its kind in Japan.
The majority of production will feed the Japanese battery industry and will be sourced from the lithium carbonate produced from the phase two expansion of Orocobre's Olaroz mine in northern Argentina's Jujuy province.
Construction will start before the end of June, and the joint-venture partners expect to commission the plant sometime in the first half of 2021. Construction will start before the end of June, and the joint-venture partners expect to commission the plant sometime in the first half of 2021
The companies estimate that it will take about 9,500 tonnes a year of primary grade lithium carbonate to produce 10,000 tonnes per year of battery grade lithium hydroxide.
A cathode manufacturing plant already exists nearby the site, and plans have been announced to develop a battery manufacturing facility in the area, Orocobre notes in a press release.
Capital costs for the project are forecast to run to $77.6 million, excluding VAT, but the joint-venture is entitled to a subsidy of $27.1 million from the Japanese government.
The subsidy will be received once the project "reaches mechanical completion," which is expected to occur in the first half of 2021, the joint-venture says.
Financing the plant will come from $82.1 million of term/bridging loans and $9 million of shareholder equity. (Orocobre's share is $6.8 million and Toyota Tsusho's is $2.3 million.)
Japanese banks have already approved two loans with interest rates of below 1%.
Operating costs, excluding the feedstock, are forecast to run to about $1,500 per tonne.
Orocobre's partnership with Toyota Tsusho began in January 2010 through a definitive joint-venture agreement to develop the lithium brine project. Orocobre holds 72.7% of the joint-venture holding company and Toyota Tsusho 27.32%.
The provincial government of Juyuy became a project partner in June 2012.
Today the holding company owns 91.5% of Olaroz and the Juyuy provincial government owns 8.5%.
Olaroz began operations in April 2015 and has an estimated mine life of at least forty years.
The joint-venture approved the final investment decision for the stage 2 expansion of the Olaroz facility in November 2018.
The stage 2 expansion will increase the production capacity by about 25,000 tonnes per year of lithium carbonate, bringing total production capacity to 42,500 tonnes per year.
Total capex is estimated at about $295 million, including a contingency of $25 million.
Over the last year, Orocobre's shares on the TSX have traded within a range of $2.74 and $5.95 per share. At market close they were trading at $3.33 apiece.
The company has about 261 million common shares outstanding for a market cap of around $868 million.
(This article first appeared in The Northern Miner)