Orocobre, Toyota to expand Olaroz Li plant

Australian lithium producer Orocobre and its Japanese partner Toyota Tsusho (TTC) have approved the stage two development of their Olaroz lithium facility in northern Argentina.

A final investment decision has been announced and will see around $295mn being spent on increasing Olaroz' capacity by 25,000 t/yr to 42,500 t/yr of lithium carbonate, Sydney- and Toronto-listed Orocobre said.

Stage two of Olaroz will produce technical-grade lithium carbonate, part of which will be utilised by the proposed $60-70mn Naraha 10,000 t/yr lithium hydroxide plant in Japan.

During the development of stage two, the stage one plant will progressively migrate to 100pc battery-grade lithium carbonate production.

Stage two is expected to produce 17,500 t/yr of battery-grade lithium carbonate, 9,500 t/yr technical-grade lithium carbonate, which will go to the Naraha plant, and 15,500 t/yr of technical-grade lithium carbonate at full production.

Early stage two work has already started on ponds, roads and camps. Negotiations with contractor Veolia for the entire engineering, procurement and construction contract are expected to be completed by the end of December.

Funding will come from project debt, operational cash flows and shareholder loans, with Japan's state-owned energy agency Jogmec providing a liability scheme for the project.

Orocobre said that its cash balance of over $300mn at the end of September will go towards its share of funding Olaroz and Naraha. The second stages of Olaroz and Naraha are expected to be operational in the second half of 2020.

"The commitment to stage two of Olaroz will cement Orocobre's position as a global lithium producer at the bottom quartile of the cost curve. The strong relationship with TTC continues to be mutually beneficial and will support the ongoing development and further expansion of the world-class Olaroz asset," Orocobre managing director Richard Seville said.

"We expect the economic return on this incremental investment [Olaroz] to be very attractive and it will be further enhanced by the proposed construction of a lithium hydroxide plant at Naraha, which will utilise feedstock from stage two of Olaroz," Masahuru Katayama, TTC's general manager of resource development, said. TTC is the trading arm of Toyota.

The expansion of Olaroz is the biggest investment decision to increase output in the South American lithium market for some time. It comes shortly after South Korea's Posco paid $280mn to Australia's Galaxy Resources for a package of tenements in Argentina.

Most of the big investment decisions in the lithium market over the past two years have been focused on Western Australia (WA), the latest being US-based Albemarle's conditional agreement to acquire a 50pc stake in the Wodgina lithium proiect for around $1.15bn. Chile-based SQM and China's Tianqi Lithium have also invested hundreds of millions of dollars in mines, concentrate plants and downstream chemical plants in WA.