After seven years of planning, developing, construction and commissioning, the first sale of lithium carbonate from the Olaroz Lithium Facility occurred in late April 2015 and volumes have been increasing since that time. Olaroz hosts a JORC/NI43-101 compliant, high quality, low-cost and long life resource. The measured and indicated resource of 6.4 Mt LCE is capable of sustaining current continuous production for 40-plus years with only ~15% of the defined resource extracted.
The plant was fully commissioned and commercial production commenced in late January 2015. The cornerstone lithium brine project was founded in a joint venture agreement between Australian ASX and TSX listed company Orocobre Limited, Japanese trading company Toyota Tsusho Corporation (TTC) and the Mining Company of the provincial government of Jujuy, (JEMSE). The operation has been designed for capacity expansion with additional stage developments planned in-line with market demand. Recent exploration at Olaroz has discovered the potential for significant additional brine resource which is supportive of the future plans to increase production capacity while still maintaining a sustainable long life resource.
The Olaroz Lithium Facility is located in Jujuy Province in northern Argentina, approximately 230 kilometres northwest of the capital city of Jujuy. The operations are at an altitude of 3,900 metres above sea level and produce lithium carbonate from the Salar de Olaroz brine resource which contains high concentrations of lithium and potash brine.
The Facility is supported by favourable conditions in terms of both the operating environment and local infrastructure. Very limited rainfall combined with dry, windy conditions enhances the brine-evaporation process. The Facility is also serviced by gas pipelines, high voltage electricity, and paved highways. Three major seaports, Buenos Aires in Argentina and Antofagasta and Iquique in Chile are serviced by international carriers and are easily accessible by road and/or rail.
The Olaroz Lithium Facility began as a joint venture project built in partnership with Japanese trading giant Toyota Tsusho Corporation (“TTC”) and the mining investment company owned by the provincial Government of Jujuy, Jujuy Energia y Mineria Sociedad del Estado (“JEMSE”).
The partnership with TTC began in October 2012, through the execution of a definitive joint venture agreement to develop the Olaroz Lithium Project. This agreement provided a comprehensive financing plan structured to secure TTC’s direct participation in, and support for, funding the planned development at Olaroz. In turn, TTC’s participation in the project was through a 25% equity stake at project level. In a business where product quality is paramount, TTC’s investment provided a strong endorsement of the quality of the Olaroz resource and the high purity battery grade product produced at the Olaroz Facility.
JEMSE’s became a project partner in June 2012, shortly before Orocobre received final government approval to commence construction on the project. JEMSE’s partnership not only provided the initial crucial support during the project development phase but is also imperative in providing ongoing assistance with navigating government and regulatory approvals within Argentina. JEMSE’s participation in the project is held through an 8.5% equity stake at project level.
The Olaroz Lithium Project Joint Venture is operated through Orocobre’s Argentine subsidiary, Sales de Jujuy S.A. (SDJ), the ownership of which is held in a Singaporean company, Sales de Jujuy Pte Ltd, that is the joint venture company with partner Toyota Tsusho and JEMSE. The effective Olaroz Project equity interest will be Orocobre 66.5%, TTC 25.0% and JEMSE 8.5%.
The structure is shown below:
As part of their obligations under the agreement, TTC successfully procured a substantial and low cost project debt facility that was finalized in December 2012. The debt financing was provided by Mizuho Corporate Bank Ltd, with a maximum facility amount of US$192 million as detailed below:
- Parameters of project finance facility (100% SDJ) Values
- Original project finance facility balance US$192 million
- Principal of project facility repaid over first 1.5 years US$ 37 million
- Project Debt at 31 March 2017
- Project Debt repayments scheduled every six months to September 2024
- Project Debt incurs a low average interest rate of ~4.25%
- No additional cash has been provided to the JV since March 2016
- All other debt facilities (SBLCs and shareholder loans) are internal or cash backed.
Salar de Olaroz is a long life and high quality resource which is capable of sustaining continuous production for forty-plus years with only 15% of the defined resource extracted. The original design of the Olaroz Lithium Facility allows for future developments and/or expansion plans to occur in line with market demand. A second phase lithium carbonate expansion at Olaroz can occur at a substantial discount per tonne of capacity when compared to the original capital cost.
The estimated measured and indicated resource of 1,752 million cubic metres of brine at 690 mg/L Lithium, 5,730 mg/L Potassium and 1,050 mg/L Boron at the Olaroz Facility equates to 6.4 million tonnes of lithium carbonate and 19.3 million tonnes of potash (potassium chloride) based on 5.32 tonnes of lithium carbonate being equivalent to 1 tonne of lithium and 1.91 tonnes of potash being equivalent to one tonne of potassium. Subsequent independent modelling has indicated improved lithium brine grades of 825 mg/l, which allowed for an increase in annual lithium carbonate production. For comparative purposes, an average lithium grade of 800 mg/L is similar to FMC’s Hombre Muerto operation and approximately double the grade of both the Silver Peak, Nevada and Rincon, Argentina operations. The Olaroz Facility’s Mg:Li ratio is also low (which is desirable for processing) at around 2.4, compared to Atacama, Rincon and Uyuni at 6.4, 8.6 and 19 respectively. Only Silver Peak and Hombre Muerto are lower at 1.4.
The processing method at Olaroz is based on existing brine treatment operations with modifications tailored to suit the brine chemistry and climatic conditions at Olaroz. Lithium brine operations typically have a much lower cost of production than hard-rock lithium deposits. The cash operating cost of approximately US$3,500/t positions the Company as being one of the lowest cost lithium producers globally.
The processing method begins with the extraction of lithium-rich brine from bore fields drilled on the salar. The brine is then transferred to a series of evaporation ponds which utilise solar radiation and wind for evaporation and concentration along with a precipitation process to remove impurities. The concentrated brine is then fed into the lithium carbonate plant which precipitates, filters and dries the finished high-quality lithium carbonate product.
Olaroz sells to multiple customers in multiple markets across a spread of geographies. It is Orocobre’s intention to continue to cultivate a diverse customer base, end use and geographic sales base.
The main markets for purified product are cathode manufacturers while primary products are sold to the ceramic and glass markets, chemical manufacturing customers for the manufacture of lithium hydroxide and other chemicals.
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 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 primary focus for Orocobre is to achieve Phase 1 Design production rates at Olaroz. The Phase 2 expansion investment decision remains dependent on achieving these production rates and the expansion being funded without further equity capital (i.e. funded by project finance and Stage 1 operating cashflow).
In December 2016, Orocobre announced the results of scoping studies in to 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 proposed product mix is 17,500 tonne per annum Battery Grade lithium carbonate (>99.5%) from the existing purification circuit, and 25,000 tonne per annum Industrial Grade lithium carbonate (avg. 99.0%), of which ~9,000 tonne per annum will be used to feed the planned 10,000 tonne per annum 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 the bores, ponds and primary circuit of Phase 1 at Olaroz. It should be noted that the full cost of the pond system contained within the total capital expenditure estimate for Phase 2 is US$75 million.