Orocobre and Toyota Tsusho plan lithium plant in Japan

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 be sourced from the lithium carbonate produced from the 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.

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 exists nearby the site, and plans have been announced to develop a battery manufacturing facility in the area, Orocobre says in a press release.

Capital costs for the project are forecast at US$77.6 million, excluding VAT, but the joint venture is entitled to a subsidy of US$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 US$82.1 million of term-bridging loans and US$9 million of shareholder equity. (Orocobre’s share is US$6.8 million and Toyota Tsusho’s is US$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 US$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 40 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 US$295 million, including a contingency of US$25 million.

Orocobre’s shares are trading at $3.33 with a 52-week range of $2.74 to $5.95. The company has an $868-million market capitalization.


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