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Emerging Lithium Producers Nearing Production In 2013

Orocobre's Olaroz project

Orocobre's Olaroz lithium-potash project is located in Argentina's Puna region — a hotspot for lithium brine reserves. The Olaroz project is a joint venture between Orocobre (66.5 percent), Toyota Tsusho (TSE:8015) (25 percent) and the Jujuy government (8.5 percent). In July 2012, Orocobre received final governmental approval to commence construction of the project.

A definitive feasibility study (DFS) completed in May 2011 shows an after-tax NPV of $449 million (at a discount rate of 7.5 percent) when the value of the potash by-product is included. Cash operating costs are projected at $1,230 per MT of lithium carbonate when potash is included as a by-product. The DFS also includes a resource estimate of 6.4 million MT of lithium carbonate and shows a mine life of more than 40 years based on a previously planned annual production rate of 16,400 MT per year (mtpa). The planned annual production rate was recently revised to 17,500 MT of battery-grade lithium carbonate due to an increase in the expected brine grade.

Last month, Orocobre's Japanese partner helped the joint venture secure $192 million in debt financing from Mizuho Corporate Bank. With funding in place, construction commenced at the end of 2012 and Orocobre has targeted the second quarter of 2014 for first production.

Lithium Americas' Cauchari-Olaroz project

Lithium Americas' Cauchari-Olaroz lithium-potash project neighbors that of Orocobre in Argentina. In December, the company received final approval from the Jujuy provincial government for the project's development, including a 20,000-mtpa lithium carbonate processing facility and a 40,000-mtpa potash processing facility.

A company press release notes that the Cauchari-Olaroz deposit hosts enough proven and provable reserves (more than 2.7 million MT of lithium carbonate) to operate at an annual production rate of 40,000 MT for 40 years. A DFS on the project shows net cash operating costs of $1,332 per MT of lithium carbonate (when potash is included as a by-product), giving it the potential to be one of the lowest-cost operations in the industry. The DFS has also determined a pretax NPV of $738 million with an IRR of 23 percent.

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