Orocobre Limited (ASX: ORE, TSX: ORL) ("Orocobre" or "the Company") is pleased to advise that Orocobre, Toyota Tsusho Corporation (TTC) and JV boards have given approval to the Final Investment Decision (FID) for the Stage 2 Expansion of the Olaroz Lithium Facility.
The Stage 2 Expansion will increase lithium carbonate production capacity by approximately 25,000 tonnes per annum (tpa) bringing total Olaroz production capacity to approximately 42,500 tpa. Stage 2 will produce technical grade (>99.0% Li2CO3) lithium carbonate, part of which will be utilised as feedstock for the proposed Naraha Lithium Hydroxide Plant to be built in Japan.
During the development of Stage 2, the Stage 1 plant will progressively migrate to 100% battery grade lithium carbonate production.
Upon achievement of full production rates, the product distribution post Stage 2 is expected to be:
1.17,500 tpa of battery grade lithium carbonate
2.9,500 tpa of technical grade lithium carbonate as feedstock for 10,000
tpa battery grade LiOH production at Naraha Lithium Hydroxide Plant
3.15,500 tpa of technical grade lithium carbonate
Construction of key items for the Stage 2 Expansion such as ponds, roads and camp upgrades has already commenced and to date has been funded from operating cashflow. The revised total capital expenditure for Stage 2 is expected to be US$295 million including US$25 million contingency. This estimate excludes the crystalliser/evaporator project which would operate for both Stage 1 and Stage 2 on which feasibility studies are currently being undertaken. The expected cost of this project is approximately US$15m and will be subject to normal joint venture capital approval processes in due course.
Financing
The Stage 2 Expansion will be funded by a combination of project debt, operating cashflows and shareholders loans. US$180 million of project finance is anticipated to be provided by a Japanese Bank on similar terms to the Stage 1 project finance facility. The Stage 2 project finance facility is expected to be secured in a similar manner to that of Stage 1 utilising a joint liability scheme provided by JOGMEC (Japan Oil, Gas and Metals National Corporation). The Stage 2 facility will have a term of seven years. Documentation is expected to be finalised to have the draw down available in Q1 2019.
At 30 September, Orocobre had US$308 million of cash available for funding equity contributions to Olaroz Stage 2 Expansion, the Naraha Lithium Hydroxide Plant and other growth projects.
Joint Marketing
In accordance with arrangements made in January, TTC and Orocobre have entered into a joint marketing arrangement whereby the partners will work jointly on setting the strategic direction of the customer arrangements and agree the commercial terms. TTC will remain sole and exclusive Sales Agent.
Management Fees
Orocobre will be paid a fee of 1.5% of the sales revenue for managing the Olaroz operations.
Consolidation of Joint Venture Accounts
TTC and Orocobre have also agreed to changes in joint venture agreements that reflect Orocobre's majority joint venture interest and will allow Orocobre to consolidate earnings from the Sales de Jujuy Joint Venture (Olaroz) in its corporate financial accounts. Consolidation is expected to be implemented for FY19 full year results.
Naraha Lithium Hydroxide Plant
Negotiations on the EPC contract for the proposed Naraha Lithium Hydroxide Plant are advancing rapidly between TTC as operator and Veolia the preferred EPC contractor. As previously advised the EPC contract is expected to be finalised during this quarter.
Orocobre Managing Director Richard Seville and incoming CEO Martin Perez de Solay
