"The only ASX listed company producing high value lithium
chemicals for the growing battery and industrial
market"
BRISBANE, Australia,
Oct. 27, 2017 /CNW/ --
SEPTEMBER QUARTER 2017 KEY POINTS1
OLAROZ LITHIUM FACILITY (ORE
66.5%)2
- Production through the September quarter was 2,135 tonnes of
lithium carbonate with consecutive increases month on month as
brine concentration and evaporation rates increased
- Production has continued to increase in October, and is on
track to achieve budget of 1,220 tonnes for the month. Production
has averaged 44 tonnes per day (90% of design) over the past week
as brine concentration continued to rise in line with
modelling
- The Company reiterates guidance for the full year of 14,000
tonnes of lithium carbonate with production split approximately
45/55 between the first and second halves with record production
expected in the December quarter at a production cost of
<US$4,000/tonne
- Sales revenue for the September quarter is US$23.2 million on total sales of 2,072 tonnes of
lithium carbonate
- Average FOB price received up 5% quarter on quarter (QoQ) to
US$11,190/tonne with higher priced
contracts reflecting firmer market conditions. Prices are expected
to continue to exceed US$11,000 per
tonne FOB in the December FY18 quarter with market conditions
remaining tight
- Cash costs (on cost of goods sold basis) were US$4,987/tonne as a result of lower production
volumes in July and August and increased soda ash unit costs caused
by the impact of bad weather in June
- Gross cash margins remained strong at US$6,203/tonne and are expected to increase as
costs reduce to previous levels with increased production rates,
and normalised soda ash costs and consumption
- SDJ SA (SDJ) made a payment of US$14
million (100% basis) to Mizuho
Bank against the project finance facility. The Mizuho
loan balance has now been reduced by US$47
million over the last two years
- A review of the Olaroz pond system by a team of experts from
the Chilean office of multinational engineering group GHD Pty Ltd
found there were no design faults that would prevent overall plant
production of 17,500 tonnes per year. The team comprised five
professionals covering all aspects of pond design and operations
with collectively over 75 years of pond design and operating
experience. This review refutes misinformation and market
commentary suggesting the need for substantial capital to rectify
the Olaroz pond system
- Submissions have been made to the Japanese government for
substantial subsidies and rebates relating to construction costs of
the 10,000 tonne per annum battery grade lithium hydroxide plant, a
response to this submission is expected in November
BORAX ARGENTINA
- Overall sales volume in the September quarter was 8,543 tonnes
(11,398t last quarter). This follows the strategic exit of a loss
making, high volume mineral product line for the Agricultural
market in Brazil
- Sales of refined higher product value borates (decahydrate,
pentahydrate, anhydrous and DOT) were up 26% on volume compared to
the previous corresponding period
- The average sales price increased by approximately 20% with the
change in product mix
- The Tincalayu Expansion Project feasibility study (from 30,000
tonnes to 120,000 tonnes decahydrate equivalent and 40,000 tonnes
of Boric Acid) is 90% complete with the various components
undergoing internal review
ADVANTAGE LITHIUM AND CAUCHARI
- Advantage Lithium (ORE 35%) announced results from 48 hours of
pump tests at drill hole CAU10 with an average lithium grade of 682
milligrams per litre (mg/l) and a Mg/Li ratio averaging 2.1:1.
Sampling from the CAU09 rotary hole averaged 662 mg/l lithium with
a Mg/Li ratio of 2.2:1. These concentrations are significantly
above the resource grade
CORPORATE
- As at 30 September 2017, Orocobre Group had US$46.6 million of available cash after providing
funding for a working capital build at Borax Argentina
- The Company executed agreements with Lithium X Energy Corp. for
the sale of Diablillos tenements for cash and shares with a value
of approximately US$2m and a 1% net
revenue based royalty on future production. The shares
have been issued and the cash component will be received in this
quarter
OLAROZ LITHIUM FACILITY
For more information on Olaroz please click here
The Olaroz Lithium Facility is located in the Jujuy province of
Argentina. Together with partners, Toyota Tsusho Corporation
(TTC) and Jujuy Energia y Mineria Sociedad del Estado
(JEMSE), Orocobre is now operating the first large scale
lithium chemicals brine based facility to be commissioned in
approximately 20 years.
Olaroz produces high quality lithium carbonate chemicals for
both the battery and industrial markets. It is the only
operation in the world with an integrated purification circuit that
permits it to produce, if desired, 100% battery grade lithium
carbonate (+99.5%) on site.
The Olaroz Lithium Facility joint venture is operated through
Argentine subsidiary Sales de Jujuy S.A. The effective equity
interests are: Orocobre 66.5%, TTC 25.0% and JEMSE 8.5%.
PRODUCTION, SALES AND OPERATIONAL UPDATE
PRODUCTION AND SALES
Production for the quarter was 2,135 tonnes. As in the
previous quarter, operations continued to be impacted by slow
evaporation rates related to winter weather conditions and the
finalisation of the pond rebalancing process previously
disclosed. Since early September, evaporation rates have
increased significantly resulting in increased brine concentration,
increased harvest pond inventory and increasing production rates as
feed brine concentration has risen. This trend has continued into
October as discussed later in the report.
Sales revenue for the quarter was US$23.2
million on total sales of 2,072 tonnes with average sales
prices up 5% to US$11,190/tonne3. Operating
costs (on a cost of goods sold basis) were US$4,987/tonne, up 17% QoQ due to lower
production levels and the impact of higher soda ash unit costs. As
reported on 22 June 2017, bad weather in NW Argentina resulted in Olaroz procuring
alternative sources of soda ash during June and July at
significantly higher than normal cost. The soda ash costs
resulted in higher inventory unit costs being carried forward into
July which combined with lower production months of July and August
resulted in higher costs for the September quarter. Lower
unit costs from higher production rates in the month of September
are carried forward with inventory into October.
Metric
|
September
quarter
2017
|
June
quarter
2017
|
Change QoQ
(%)
|
Production
(tonnes)
|
2,135
|
2,536
|
-16%
|
Sales
(tonnes)
|
2,072
|
2,566
|
-19%
|
Average price
received (US$/tonne)
|
11,190
|
10,696
|
5%
|
Cost of sales
(US$/tonne)4
|
4,987
|
4,279
|
17%
|
Revenue
(US$M)
|
23.2
|
27.4
|
-15%
|
Gross cash margin
(US$/tonne)
|
6203
|
6417
|
-3%
|
Gross cash margin
(%)
|
55%
|
60%
|
-8%
|
Five days of plant planned maintenance was brought forward to
this quarter to minimise the impact later in the year when daily
production rates are expected to be higher. Costs are expected to
decrease to <US$4,000/tonne in the
December quarter as brine concentration and production
increases.
Gross cash margins for the quarter remained strong at
US$6,203/tonne with the increase in
sales prices partially offsetting the increase in costs.
Overall gross operating margins remain strong at 55%. SDJ remains
strongly operating cashflow positive.
OPERATIONAL UPDATE
During the quarter the Olaroz operations recorded the production
of a cumulative 20,000 tonnes of lithium carbonate since operations
commenced in 2015. This milestone is testament to the
operational team at Olaroz who have relentlessly pursued
operational excellence in developing the first new brine operation
in 20 years. These development and operating skills provide
an on-going competitive advantage for Orocobre in the multi-phase
development of Olaroz.
Over the September quarter the focus has remained on pond
management both from the perspective of inter-pond brine transfer
and operational controls and monitoring. The design and
upgrade for the improved transfer and pumping system required the
installation of six new pumps, remote monitoring systems and
additional water cleaning lines for a revised capital cost of
US$2.7m. This program is mostly
complete and the final two pumps are expected to be installed in
the first weeks of November in time for increased evaporation rates
which will necessitate increased inter-pond brine
transfers.
As noted in February, the process of re-establishing the correct
inventory profile (volume and concentration) would take
approximately six months, this is now complete and concentrations
across the entire pond system are now approaching steady state
conditions. With increasing brine concentration, the
production rate and recovery have risen, and reagent consumption
rate has decreased. Production during October is on track to
deliver the budget of 1,220 tonnes for the month the same as
produced in July and August combined. In the last seven days
production has averaged 46 tonnes per day (96% of design) and
record production is expected for the December quarter. The
Company reiterates guidance for the full year of 14,000 tonnes with
production split approximately 45/55 between the first and second
halves of the financial year.
The chart below shows the seasonality of average evaporation
rates and the historical and forecast harvest pond inventory
profile. The harvest pond inventory continues to increase
generally in line with expectations and is approaching maximum
historical levels. The deviation through October was due to
one harvest pond being taken out of circuit for maintenance works
to recover brine storage capacity which had been reduced by the
secondary liming process which occurs on the brine feed to that
pond. Last week the pond was brought back into circuit and it
is now being re-filled. The primary and intermediate ponds
are showing very good correlation to modelling. The Company is
encouraged that the measured data across the pond system is much as
predicted from the pond evaporation and production model.
![](https://mma.prnewswire.com/media/591856/Orocobre_Limited__Infographic.jpg)
Bathymetric surveys are complete and data is being analysed.
The Company does not expect any significant changes to
inventory levels or production guidance from this work, as such
brine inventory levels will be reported at half and full year
results.
Prior to pond management issues and a constraint of feedstock,
the purification circuit has achieved a maximum throughput rate of
43 tonnes per day (tpd) and run consistently at 35-40 tpd (73-83%
of nameplate). Hydrocyclones have been installed and are
operational, these are expected to allow the purification circuit
to achieve nameplate capacity of approximately 48 tonnes per day
over the coming months.
The primary circuit runs consistently above nameplate capacity
with a maximum achieved throughput of 66 tpd, some 35% above design
rate of 48 tpd.
Carbon dioxide
recovery
Carbon dioxide is used at the
Olaroz lithium facility in the production of battery grade lithium
carbonate. It is currently sourced from near Buenos Aires, Cordoba and Mendoza and transported up to
1,800 kilometres by truck. Consequently, it is a significant
component of reagent costs and the Company is installing
CO2 recovery systems on various parts of the
purification circuit to recover CO2 from the production
process.
Results from a engineering studies and a trial plant over the
last year have demonstrated that recovery of up to 50% of total
CO2 is possible, and orders have now been placed for
provision and installation of permanent equipment. Capital
expenditure on this project is expected to be less than
US$2M. The CO2 plant
is supplied as a package by a specialist manufacturer in
Europe.
Installation and operation of the permanent CO2
recovery equipment is expected in the June Quarter 2018.
Third party review of pond design
A review of the Olaroz pond system by a team of experts from the
Chilean office of multinational engineering group GHD Pty Ltd who
collectively have more than 75 years of pond design and management
experience has been completed. The review concluded that there were
no design faults that would prevent overall plant production of
17,500 tonnes per year. Since February the Company has spent
US$2.7 million on the addition of
pumps and monitoring systems, and considers this work is now
effectively complete and has achieved the aim of adding robustness
to the pond system. Misinformation and market commentary suggesting
the need for substantial capital to rectify the pond system is
incorrect.
MARKET AND SALES
Total volume of lithium carbonate sold in the September quarter
was 2,072 tonnes. Lithium carbonate prices increased 5% to
US$11,190/tonne (FOB) for the
quarter. The price achieved for the quarter is a result of higher
pricing in short term contracts compared to last quarter.
Since operations commenced Olaroz has developed a strong
customer base of >70 customers who have tested and accepted the
high grade Purified and Prime products. The Purified product
regularly tests at 99.9% lithium carbonate and is sold to battery
and cathode end users. The Prime product regularly tests at
99% lithium carbonate and is sold to a variety of technical and
industrial end users. Neither of these products require any
additional processing for their respective markets and uses.
LITHIUM MARKET
Analysis by Orocobre determined that demand for lithium
continued to grow at a rate which supply struggled to meet.
Leading into the quarter, existing brine producers including SQM,
Albemarle, and FMC confirmed ambitious expansions amounting to
approximately 100kt LCE additional supply by 2020. However,
no significant new supply from the majors is thought to have
entered the market during the quarter, resulting in sustained
market tightness.
Australian hard rock projects continued to steadily ramp-up
following what Chinese import data showed was a slow start to the
year. Supply of spodumene concentrate from Mt Marion & Mt
Cattlin was quickly absorbed by Chinese conversion plants which
otherwise rely on scarce domestic production and/or imported
lithium carbonate. Key downstream processors are slowly
moving to meet growing market demand with expansions announced by
Tianqi, Ganfeng, Albemarle, Yahua, Ruifu, General Lithium.
However, while those expansions would double the current installed
conversion capacity it will require over US$2.5Bn5 capital (Company
Announcements, Asian Metals). Security of supply remains a
concern with a number of capital guarantees and offtake agreements
proposed to finance projects.
The shift toward partnerships between raw material suppliers and
compounders/processors that occurred in 2016 appears to have
stretched further downstream with battery and car manufacturers
eager to secure future raw material supply needed to meet electric
vehicle targets. It seems likely that this form of
disintermediation will continue with Volvo, Volkswagen, Jaguar Land
Rover and BMW all announcing plans to have completely electrified
vehicle fleets in the future.
Car manufacturers have been encouraged to accelerate EV
expansion plans with growing awareness of future raw material
supply bottlenecks and the continued implementation of regulation
requiring the switch to electric vehicles. China continues to develop new policy with the
recent proposition of a point system in July similar to that
employed in California which
penalizes internal combustion drivers and subsidises EV
manufacturers and owners (Industrial Minerals). The European
Union has also announced plans to form a consortium that seeks to
address the lack of battery cell manufacturing capacity which may
impact the speed new EV's can come to market. Currently cell
manufacturing is dominated by Japanese firms like Panasonic and
NEC, Korea's LG and Samsung and China's BYD and
CATL.
New and varied forms of collaboration between Government and
industry provides greater certainty that short- and long-term
demand for lithium can only grow and push EV penetration rates to
over 5% p.a. by 2020. It is the Company's expectation that
any new lithium supply to enter the market during this time will be
quickly absorbed, keeping prices above US$10,000 per tonne FOB in the short
term.
LITHIUM HYDROXIDE PLANT
UPDATE ON PROGRESS
Olaroz industrial grade lithium carbonate and locally sourced
Japanese lime have been used as feedstock for testing of process
design to produce lithium hydroxide by two specialised engineering
firms. The test work demonstrated that a very high-quality lithium
hydroxide could be produced from Olaroz lithium carbonate using a
customised process. The test work has also highlighted
opportunities to reduce lithium losses during conversion from
carbonate to hydroxide.
Contract negotiations are continuing with the two engineering
firms to determine the preferred contractor. The selection
criteria for choice of engineering contractor includes turn-key
commissioning and personnel training with process, product quality
and performance guarantees.
Capital and operating costs have been supplied by one of the
engineering firms during the September quarter. Information from
the second firm is expected in November.
Discussions with TTC are well advanced to determine the optimal
joint venture structure for ownership and operation of the
hydroxide facility.
Submissions have been made in September to Japanese National and
Provincial governments for development permits and subsidies for
capital costs and results from the submission are expected by the
end of November. If successful, the subsidy support could
amount to up to 50% of total capital costs for construction of a
lithium hydroxide plant.
Subject to joint venture approvals and finalisation of financing
and permitting, construction is likely to commence in June quarter
2018 with commissioning 12 months later. Orocobre does not
anticipate the need to raise equity capital for this project.
EXPANSION STUDY FOR OLAROZ
The Phase 2 expansion investment decision remains dependent on
achieving Phase 1 design production rates and the expansion being
funded without further equity capital (i.e. funded by project
finance and Phase 1 operating cashflow). Sustainable
production rates are expected to be achieved during the current
summer period (southern hemisphere) and construction is therefore
likely to commence in the first half of 2018.
REVISED SCOPE OF PHASE 2 EXPANSION STUDIES
On 15 December 2016, Orocobre
announced the results of scoping studies into the expansion of
Olaroz and the proposed doubling of production at a cost of
US$190 million including US$25 million contingency. Subsequently,
these plans have been simplified to remove the purification circuit
from the incremental production. The resultant product mix is
17,500 tonne per annum Battery Grade lithium carbonate (>99.5%)
from the existing purification circuit and 17,500 tonne per annum
Industrial Grade lithium carbonate (avg. 99.0%) which will provide
feedstock for the planned lithium hydroxide plant in Japan.
This simplified strategy results in lower capital expenditure of
approximately US$160 million
including a US$25 million contingency
and lower implementation risk as the project is based around a
simple duplication of bores, ponds and primary circuit of Phase 1
at Olaroz. The full cost of the pond system contained within the
total capital expenditure estimate for Phase 2 is
US$75 million.
Multinational engineering firm, GHD has been appointed to
oversee engineering design studies for the Olaroz Phase 2
expansion.
Key permits have been received for water extraction, additional
bores and new ponds from the Jujuy Provincial Government for the
expansion.
Plant layout and pond design is being finalised and soil tests
have been completed over the new pond area. Flowsheets, mass
balance, an equipment list and design criteria have also been
completed. Six layout options for the Li2CO3 plant and three
options for the liming plant are currently being considered and the
preliminary design for the road, pump stations, piping and
electricity lines to new extraction bore holes were completed.
BORAX ARGENTINA
The current focus for Borax Argentina has been to restructure
its business to deliver sustainable operational and financial
performance. This is resulting in a change in product mix as
described below and an improvement in average pricing. During these
changes it has been necessary for Orocobre to provide financial
support of US$2.4 million over the
quarter for the build of working capital.
OPERATIONS
Sales volumes in the September quarter 2017 were 8,543 tonnes of
combined product, a reduction from the previous quarter following
the strategic exit of a loss making, high volume mineral product
line for the Agricultural market in Brazil. A decision was made to exit this
business as it was no longer commercially attractive. Borax has
been managing out of this supply arrangement during the quarter and
a project is underway to develop a new product that delivers
improved value to customers and the business.
During the quarter production rates of refined products
continued to increase month on month (up 26% compared to the
previous corresponding period) with record production achieved at
Tincalayu and the Boric Acid plant at Campo Quijano. Costs are
expected to decrease as these unit production benefits are
realised.
COMBINED PRODUCT SALES VOLUME BY QUARTER
Previous Year
Quarters
|
|
Recent
Quarters
|
December
2015
|
10,078
|
|
December
2016
|
8,767
|
March 2016
|
8,006
|
|
March 2017
|
9,672
|
June 2016
|
9,274
|
|
June 2017
|
11,398
|
September
2016
|
11,940
|
|
September
2017
|
8,543
|
TINCALAYU EXPANSION STUDY
A study commenced in Q2 CY16 to evaluate a potential expansion
of the Tincalayu refined borates operation from its current
production capacity of 30,000 to 100-120,000 tonnes per annum and
an integrated 40,000 tonne boric acid plant.
It is anticipated that the potential expansion will
significantly increase efficiencies in the production of refined
borates at Tincalayu and contribute provide a step change
improvement in unit costs. Approvals have been received for a new
gas pipeline to supply the expanded plant and initial cost
estimates are under review.
The study is 90% complete with the various components undergoing
internal review.
MARKET CONDITIONS
Market conditions remain challenging, however there are positive
signs of economic recovery in South
America, with a recent press article in "MercoPress"
forecasting a 10% sales and output growth in the automotive sector
in Brazil for 2018.
The continued focus on production efficiencies and product mix
is required to cushion the effect of market pricing remaining at
the bottom of the price cycle.
In addition to price pressure the operations are seeing
Argentine inflation of costs which are exceeding devaluation of the
Argentine Peso. Calendar year 2017 has seen inflation of 17.5%
while the Peso has only devalued by 8.9%.
SAFETY AND COMMUNITY
SAFETY MILESTONES
The Olaroz site has recently achieved a significant milestone of
330 days of operation without a lost time injury (LTI).
At Borax, the Sijes mine site achieved two years without a LTI,
Campo Quijano achieved one year without a LTI and Tincalayu
achieved six months without a LTI.
SHARED VALUE PROGRAM AND COMMUNITY
During the quarter Richard
Seville (MD and CEO) was invited to join an Advisory Council
with CEADS (Argentine Business Council for Sustainable
Development), an organization of which Orocobre is a member.
This role will further establish Orocobre's position as a leading
and responsible lithium producer.
http://www.ods.ceads.org.ar/
Sales de Jujuy and Borax Argentina received recognition for
their commitment and contribution to academia in professional
practices and internships. A ceremony was held at the School
of Engineering of Universidad Nacional de Salta with
representatives from both companies, the University and public
officials.
Training and support has been provided in the fields of Chemical
Engineering, Industrial Engineering, IT, Human resources,
Laboratory and Electromechanical services.
Orocobre group companies also collaborate with Universidad
Católica de Salta; Siglo XXI, Universidad Nacional de Córdoba,
Universidad Nacional de San Juan and other international
educational institutions.
SDJ General Manager Cristian
Saavedra presented at the Seminar on Renewable Energy and
Sustainable Mining in Jujuy, providing an update on characteristics
of the lithium process, the current demand in world markets, the
expansion of the Olaroz plant to meet such demand and the
contribution to the development of communities. Other participants
included Miguel Soler, Secretary of
Mining, Sandra Giunta, UNJu
representative at CIDMEJu and Franco
Mignacco, President of EXAR.
ADVANTAGE LITHIUM
As previously announced, Orocobre completed the sale of a suite
of exploration assets to Advantage Lithium Corp (TSV:AAL) in the
March 2017 quarter. AAL remains
well funded having raised C$20,000,000 capital in February 2017. Orocobre holds 46,325,000 (35%) of
the issued shares of AAL and 2,550,000 warrants exercisable at
C$1.
Orocobre retains a 50% interest in the Cauchari Project of Jujuy
province in NW Argentina and AAL
has the right to increase its interest to a total of 75% by the
expenditure of US$5,000,000 or
production of a Feasibility Study. AAL also took a 100% interest in
five other lithium properties that were previously held by Orocobre
totalling 85,543 hectares.
Initial drilling results
During the quarter, Advantage Lithium advised of initial test
results from drilling and testing at the Cauchari Salar.
Initial results from the first set of composite brine samples
from hole CAU10 in the SE sector of Cauchari (see hole location in
Figure below) have returned an average lithium grade of 678
milligrams per litre (mg/l) with sample results ranging from 585 to
724 mg/l lithium and Mg/Li ratios averaging 2.1:1. These
concentrations are significantly higher than the resource
grade.
Hole CAU10 is part of a two phase program totalling 17 holes
which will lead to a scoping study. Three drill rigs are engaged on
this program.
Sampling from the CAU09 rotary hole averaged 662 mg/l lithium
with a Mg/Li ratio of 2.2:1 and geological logging of CAU07
indicated high quality sand and gravel units similar to the most
productive units at Olaroz. Drilling is continuing.
Senior Technical Appointments
Advantage Lithium also strengthened its technical capability
with the addition of Andy Robb as
Technical Advisor and Frits Reidel
as a consulting Independent Qualified Person. Andy has held
significant technical and management roles with companies such as
BHP Billiton and AMC Consulting. Andy was VP South America and
Project Director for Enirgi Group Corporation where he had
responsibility for over 200 Operational and Project staff and was
instrumental in the completion of the NI43-101 compliant Definitive
Feasibility Study for the Rincon lithium brine project located in
Salta.
Fritz and his team at FloSolutions have vast experience in brine
resource evaluation, salt-lake exploration, hydrogeology, drilling
methods, well construction, and testing gained from working on
numerous projects such as Olaroz, Cauchari (Lithium Americas) and
Maricunga.
Drill Hole Location and Details
Exploration
Hole
Number
|
Total
Depth (m)
|
Installed
Depth
(m)
|
Assay
Interval
(m)
|
Lithium
(mg/l avg)
|
Potassium
(mg/l avg)
|
Drilling
method
|
Coordinates
Gauss
Kruger Argentine Zone3
Posgar
Datum
|
Elevation
mean sea
level (m)
|
Azimuth
|
Dip
|
|
|
|
|
|
|
|
Easting
|
Northing
|
|
|
|
CAU10
|
429
|
340
|
50-340
|
678
|
6,516
|
Rotary
|
3,425,530
|
7,379,295
|
3,900
|
0
|
-90
|
CAU09
|
400
|
400
|
60-400
|
662
|
6,137
|
Rotary
|
3,423,775
|
7,377,806
|
3,900
|
0
|
-90
|
CAU07
|
275
|
Not
installed
|
Awaiting
Results
|
Diamond
|
3,421626
|
7,385,385
|
3,930
|
0
|
-90
|
*Planned Coordinates
- not confirmed by surveying at date of release
|
CORPORATE AND ADMINISTRATION
DIABLILLOS
Subsequent to the end of the quarter, Orocobre announced the
execution of agreements with Lithium X Energy Corp.
(TSXV:LIX) (OTCQX: LIXXF) ("Lithium X") in respect of
tenure held by Orocobre subsidiaries, Borax Argentina S.A.
("Borax") and South American Salars S.A. ("SAS") at the Salar de
Diablillos.
Lithium X through its wholly-owned subsidiary, Potasio Litio de
Argentina S.A. (PLASA) will acquire
2,700 hectares of tenements from Borax over which Lithium-X
currently holds usufruct rights for the extraction of lithium
brines. Lithium-X will also acquire a further 700 hectares
owned by SAS which had been excluded from the Advantage Lithium
transaction (ASX release 28 March 2017). These tenements will
be consolidated into the PLASA project, Sal
de los Angeles (SDLA) in Salta
Province, Argentina.
Under the agreement:
- PLASA acquires mineral title to the Borax and SAS
tenements
- PLASA grants a usufruct right in favour of Borax over the Borax
tenements in relation to the extraction of surface ulexite
mineralisation
- PLASA agrees to pay to Borax US$250,000 and to issue 650,000 common shares of
Lithium X to Borax or its nominee
- PLASA acquires the SAS tenements for consideration of
US$750,000 payable to Orocobre upon
certain conditions being met by SAS
- PLASA and Borax agree to cancel the existing 1.5% Mine Mouth
Royalty6 on the Borax held tenements, in consideration
of a 1% Net Revenue Royalty over the entire SDLA project, and
- Orocobre and PLASA mutually release each other from any
potential or existing claims due to past activities by either
party.
FINANCE
VAT
VAT refunds continue to be received on a timely basis and during
the quarter approximately US$4.1M was
received by SDJ.
Post the end of the quarter, July's VAT presentation of
~US$1.5M was approved and such funds
received whilst the August presentation has been submitted for
approval.
CASH BALANCE, DEBT POSITION AND STANDBY LETTERS OF
CREDIT
As at 30 September 2017, Orocobre
Group had available cash of US$46.6
million and net debt of US$68.4
million. During the quarter, approximately US$2.4 million was provided to Borax Argentina to
support a build of working capital. Corporate costs were
US$1.8 million and US$0.8 million was paid as a deposit for a
property acquisition. Further details of the acquisition will
be provided upon completion of the transaction.
SDJ made a finance payment to Mizuho
Bank in September 2017 of
approximately US$14 million including
principal and interest thereby reducing the outstanding principal
on this facility to US$144.9M
(Original facility US$191.9M).
INFLATION VERSUS DEVALUATION
The AR$/US$ exchange
rate weakened by 4% during the quarter from AR$16.63/US$ at
30 June 2017 to AR$17.31/US$ at
30 September 2017 whilst inflation
for the same period was 5.7%. When looking at specific periods such
as the calendar year to 30 September, devaluation of the AR$
against the US$ was 8.9% versus inflation of 17.5%. This resulted
in 8.6% higher than expected US$ costs for ARS peso denominated
expenses for the period, resulting in higher costs at Borax
Argentina and to a much lesser extent, SDJ. The effect of inflation
and devaluation over time generally shows that they cancel each
other out.
ANNUAL GENERAL MEETING
The Company will hold its Annual General Meeting at 9am AEST on 24 November at L23, 480 Queen Street,
Brisbane. A Notice of Meeting has been released through the
ASX with explanatory notes, however the following is provided as
further explanation of the increase in the Remuneration Pool for
Directors fees.
Resolution 6 proposes to increase the Directors fee pool by
A$250,000 in order to provide scope
for the addition of new Directors to the Board and an increase for
existing Directors whose fees have not been increased since
2014. It is the view of the current Board, that as the
Company executes the proposed growth strategy the Board may require
additional Directors with an expanded variety of skills and
experience. This resolution will provide suitable scope for
remuneration of those new Directors.
FOR FURTHER INFORMATION PLEASE CONTACT:
Andrew
Barber
Investor Relations
Manager
Orocobre
Limited
T: +61 7 3871
3985
M:+61 418 783
701
E:
abarber@orocobre.com
ABOUT OROCOBRE LIMITED
Orocobre Limited is listed on the Australian Securities Exchange
and Toronto Stock Exchange (ASX:ORE) (TSX:ORL), and is building a
substantial Argentinian-based industrial chemicals and minerals
company through the construction and operation of its portfolio of
lithium, potash and boron projects and facilities in the Puna
region of northern Argentina. The Company has built, in partnership
with Toyota Tsusho Corporation and JEMSE, the first large-scale,
greenfield brine based lithium project in approximately 20 years at
the Salar de Olaroz with planned production of 17,500 tonnes per
annum of low-cost lithium carbonate.
The Olaroz Lithium Facility has a low environmental footprint
because of the following aspects of the process:
- The process is designed to have a high processing recovery of
lithium. With its low unit costs, the process will result in low
cut-off grades, which will maximise resource recovery.
- The process route is designed with a zero liquid discharge
design. All waste products are stored in permanent impoundments
(the lined evaporation ponds). At the end of the project life the
ponds will be capped and returned to a similar profile following
soil placement and planting of original vegetation types.
- Brine is extracted from wells with minimum impact on freshwater
resources outside the salar. Because the lithium is in sedimentary
aquifers with relatively low permeability, drawdowns are limited to
the salar itself. This is different from halite hosted deposits
such as Salar de Atacama, Salar de
Hombre Muerto and Salar de Rincon
where the halite bodies have very high near surface permeability
and the drawdown cones can impact on water resources around the
Salar affecting the local environment.
- Energy used to concentrate the lithium in the brine is solar
energy. The carbon footprint is lower than other processes.
- The technology developed has a very low maximum fresh water
consumption of <20 l/s, which is low by industry standards. This
fresh water is produced by reverse osmosis from non-potable
brackish water.
- Sales de Jujuy S.A. is also committed to the ten principles of
the sustainable development framework as developed by The
International Council on Mining and Metals. The Company has an
active and well-funded "Shared Value" program aimed at the long
term development of the local people.
The Company continues to follow the community and shared value
policy to successfully work with suppliers and the employment
bureau to focus on the hiring of local people from the communities
of Olaroz, Huancar, Puesto Sey, Pastos Chicos, Catua, Susques,
Jama, El Toro, Coranzulí, San Juan
and Abrapampa. The project implementation is through EPCM
(Engineering, Procurement and Construction Management) with a high
proportion of local involvement through construction and supply
contracts and local employment. The community and shared value
policy continues to be a key success factor, training local people
under the supervision of high quality experienced
professionals.
TECHNICAL INFORMATION, COMPETENT PERSONS' AND QUALIFIED
PERSONS STATEMENTS
The Company is not in possession of any new information or data
relating to historical estimates that materially impacts on the
reliability of the estimates or the Company's ability to verify the
historical estimates as mineral resources, in accordance with the
JORC Code. The supporting information provided in the initial
market announcement on 21/08/12
continues to apply and has not materially changed. Additional
information relating to the Company's Olaroz Lithium Facility is
available on the Company's website in "Technical Report – Salar de
Olaroz Lithium-Potash Project, Argentina" dated May 113, 2011 which
was prepared by John Houston,
Consulting Hydrogeologist, together with Mike Gunn, Consulting Processing Engineer, in
accordance with NI 43-101.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This news release contains "forward-looking information" within
the meaning of applicable securities legislation. Forward-looking
information contained in this release may include, but is not
limited to, the completion of commissioning, the commencement of
commercial production and ramp up of the Olaroz Lithium Facility
and the timing thereof, the cost of construction relative to the
estimated capital cost of the Olaroz Lithium Facility, the meeting
of banking covenants contained in project finance documentation,
the design production rate for lithium carbonate at the Olaroz
Lithium Facility, the expected brine cost and grade at the Olaroz
Lithium Facility, the expected operating costs at the Olaroz
Lithium Facility and the comparison of such expected costs to
expected global operating costs, the estimation and conversion of
exploration targets to resources at the Olaroz Lithium Facility,
the viability, recoverability and processing of such resources, the
potential for an expansion at the Olaroz Lithium Facility and the
outcome of studies currently being undertaken into the proposed
expansion at Olaroz and elsewhere, the capital cost of an expansion
at the Olaroz Lithium Facility; the future performance of the
relocated borax plant and boric acid plant, including without
limitation the plants estimated production rates, financial data,
the estimates of mineral resources or mineralisation grade at Borax
Argentina mines, the economic viability of such mineral resources
or mineralisation, mine life and operating costs at Borax Argentina
mines, the projected production rates associated with the borax
plant and boric acid plant, the market price of borate products
whether stated or implied, demand for borate products and other
information and trends relating to the borate market, taxes
including recoveries of IVA, royalty and duty rate and the ongoing
working relationship between Orocobre and the Province of Jujuy,
TTC and Mizuho Bank.
Such forward-looking information is subject to known and unknown
risks, uncertainties and other factors that may cause actual
results to be materially different from those expressed or implied
by such forward-looking information, including but not limited to
the risk of further changes in government regulations, policies or
legislation; the possibility that required concessions may not be
obtained, or may be obtained only on terms and conditions that are
materially worse than anticipated; that further funding may be
required, but unavailable, for the ongoing development of the
Company's projects; changes in the scope and focus of studies
currently being undertaken with respect to the expansion of the
Company's production facilities, fluctuations or decreases in
commodity prices and market demand for product; uncertainty in the
estimation, economic viability, recoverability and processing of
mineral resources; risks associated with weather patterns and
impact on production rate; risks associated with commissioning and
ramp up of the Olaroz Lithium Facility to full capacity; unexpected
capital or operating cost increases; uncertainty of meeting
anticipated program milestones at the Olaroz Lithium Facility;
general risks associated with the further development of the Olaroz
Lithium Facility; general risks associated with the operation of
the borax plant or boric acid plant; the potential for an expansion
at the Tincalayu operations and the outcome of studies currently
being undertaken into the proposed expansion at Tincalayu a
decrease in the price for borates resulting from, among other
things, decreased demand or an increased supply of borates or
substitutes, as well as those factors disclosed in the Company's
Annual Report for the year ended June 30,
2017 filed at www.sedar.com.
The Company believes that the assumptions and expectations
reflected in such forward-looking information are reasonable.
Assumptions have been made regarding, among other things: the
timely receipt of required approvals and completion of agreements
on reasonable terms and conditions; the ability of the Company to
obtain financing as and when required and on reasonable terms and
conditions; the prices of lithium, potash and borates; market
demand for products and the ability of the Company to operate in a
safe, efficient and effective manner. Readers are cautioned that
the foregoing list is not exhaustive of all factors and assumptions
which may have been used. There can be no assurance that
forward-looking information will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such information. Accordingly, readers should not
place undue reliance on forward-looking information. The Company
does not undertake to update any forward-looking information,
except in accordance with applicable securities laws.
1All figures presented in this report are
unaudited
2All figures 100% Olaroz Project basis
3Note: Orocobre reports price as "FOB" (Free On Board)
which excludes additional insurance and freight charges included in
"CIF" (Cost, Insurance and Freight or delivered to destination
port) pricing. The key difference between an FOB and CIF
agreement is the point at which responsibility and liability
transfer from seller to buyer. With a FOB shipment, this typically
occurs when the goods pass the ship's rail at the export port. With
a CIF agreement, the seller pays costs and assumes liability until
the goods reach the port of destination chosen by the buyer.
The Company's pricing is also net of TTC commissions.
The intention in reporting FOB prices is to provide clarity on the
sales revenue that flows back to SDJ, the joint venture company in
Argentina.
4Excludes royalties and head office costs
5Assumes capital intensity of Tianqi Kwinana plant
US$400M for 24ktpa LCE conversion
plant.
6Mine Mouth Royalty is calculated as revenue less all
costs incurred from the point of brine extraction.
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SOURCE Orocobre Limited