Orocobre Limited: Quarterly Report of Operations For the Period Ended 31 December 2012

Orocobre Limited: Quarterly Report of Operations For the Period Ended 31 
December 2012 
BRISBANE, AUSTRALIA -- (Marketwire) -- 01/31/13 -- Orocobre Limited
(TSX:ORL)(ASX:ORE) - 
HIGHLIGHTS AND SIGNIFICANT DEVELOPMENTS  
Salar de Olaroz Lithium-Potash Project: 


 
-  Orocobre and Toyota Tsusho Corporation ("TTC") sign definitive Joint     
   Venture Agreement to finance and build flagship Olaroz lithium project.  
                                                                            
-  Design production rate increased to 17,500 tonnes per year of battery    
   grade lithium carbonate, with capital cost of US$229 million including   
   US$22 million contingency.                                               
                                                                            
-  Documentation executed for US$192m low-cost, comprehensive project debt  
   financing package by Mizuho Corporate Bank ("Mizuho"). Construction      
   officially commenced in November 2012 with initial commercial production 
   anticipated in Q2 2014.                                                  
                                                                            
-  All major contracts awarded to this point have been on or under budget   
   and significant progress has been made in construction.                  
                                                                            
-  Final governmental approval received and mining leases granted.          

 
Cauchari Lithium-Potash Project (Orocobre 85%): 


 
-  Completion of maiden resource estimate of an inferred resource containing
   approximately 470,000 tonnes lithium carbonate equivalent and 1.6 million
   tonnes of potash. Cauchari lies approximately 20km south of the planned  
   Olaroz Project processing plant.                                         

 
Institutional Capital Raise & Shareholder Purchase Plan 


 
-  On 5 November, 2012, the Company announced the completion of a placement 
   of 12.38 million ordinary shares to institutional investors at an issue  
   price of A$1.70 per share, raising A$21 m prior to costs. A shareholder  
   purchase plan at the same pricing raised an additional A$3.7 m.          

 
Corporate 


 
-  The Company appointed Mr. Robert Hubbard to Orocobre's Board of          
   Directors, replacing Mr. Neil Stuart, who retired from the Board         
   following the 2012 Annual Meeting of Shareholders on 30 November, 2012.  
                                                                            
-  The Company appointed Mr. Neil Kaplan to the position of Chief Financial 
   Officer and Mr. David Hall to the position of Business Development       
   Manager.                                                                 
                                                                            
-  Mining Company of Year.                                                  
                                                                            
   On 19 November, the Company announced that it has been named the "Mining 
   Company of the Year 2012" in Argentina.                                  
                                                                            
-  Cash position of A$38.9 million at the end of the quarter.               

 
Salar De Olaroz Lithium-Potash Project  
The Olaroz Project is Orocobre's flagship project located in Jujuy
province of Argentina.  
On 17 October, 2012 the Company announced a major development on the
Olaroz Project. Following positive investment decisions by the board
of directors of both Orocobre and Toyota Tsusho Corporation Ltd
("TTC"), it was announced that the companies have executed the
definitive Shareholders Agreement for a joint venture to develop the
Olaroz Project.   
Subsequently, on 6 December, 2012 the Company announced that with
joint venture partner Toyota Tsusho Corporation ("TTC"), the
companies have executed the loan documentation for the Olaroz project
financing. As had been previously announced, the project financing
will be provided by Mizuho Corporate Bank Ltd ("Mizuho") with a
maximum facility amount of approximately US$192 million as detailed
below: 


 
----------------------------------------------------------------------------
Parameters                      Values                                      
----------------------------------------------------------------------------
Maximum Facility                US$191.9 million                            
----------------------------------------------------------------------------
Equity by Sales de Jujuy        US$82.8 million                             
----------------------------------------------------------------------------
Maximum Debt : Equity Ratio     70% : 30%                                   
----------------------------------------------------------------------------
Construction Cost               US$229.1 million including $22 million      
                                contingency                                 
----------------------------------------------------------------------------
Primary Debt Facility           US$146.3 million                            
----------------------------------------------------------------------------
Additional facilities           US$45.6 million                             
----------------------------------------------------------------------------
Term                            10 years                                    
----------------------------------------------------------------------------
Grace Period                    2 years                                     
----------------------------------------------------------------------------
Dividend Payments               Borrower may pay dividends bi-annually after
                                meeting debt service obligations to Mizuho  
----------------------------------------------------------------------------

 
After completion of construction and after satisfying operating
performance tests, JOGMEC will provide guarantees for a maximum 82%
of the project debt to a maximum of US$158 million.  
The overall cost of the debt funding including JOGMEC guarantee is
expected to be approximately 4.5% of the drawn amount and will be
fixed for the term of the loan at the time of drawing on the debt
facility.  
The execution of this definitive Joint Venture Agreement and
associated financing is the culmination of this two and a half year
process, and is a vote of confidence in the project by TTC, Mizuho
and JOGMEC. In a business where product quality is of paramount
importance it is also an acknowledgment of the quality of the high
purity battery grade product produced at the Olaroz Project over the
last 18 months. The detailed engineering phase of the Olaroz Project
has also been completed, resulting in two noteworthy changes to the
scope of the project. First, the design capacity of the operation has
been increased to 17,500 tonnes per annum ("tpa") of lithium
carbonate from 16,400 tpa provided for in the Feasibility Study. This
production improvement is due to an increase in the expected brine
grade from 775mg/l in the Feasibility study to 825mg/l following the
result of the 3D finite difference modeling under taken since the
Feasibility Study (see Company's ASX/TSX Announcement dated 25
January, 2012). With changes to the flow sheet, expected potash
recovery has also been increased to approximately 20,000 tpa compared
to 10,000 tpa in the Feasibility Study. Potash credits and capital
costs are not currently included in the first phase of the project
development and are subject to a later investment decision.   
Second, following completion of detailed engineering, and having
tendered all material contracts with the exception of the contract
for the construction of the lithium carbonate plant, the capital cost
estimate has been revised to US$229 million from US$207 million in
the Feasibility Study. The revised estimate includes US$22 million of
contingency funds and US$16m of expenditure already made. The Olaroz
Project Joint Venture is operated through Orocobre's Argentine
subsidiary, Sales de Jujuy S.A. ("SDJ SA"). The effective Olaroz
Project equity interest will be Orocobre 66.5%, TTC 25.0% and JEMSE
8.5%. (Details of the corporate structure are provided in the Company
announcement of 17 October, 2012.  
Under the terms of the Joint Venture Agreement, TTC and Orocobre will
contribute project equity of US$82.8 million, equating to
approximately 30% of maximum project funding if the project financing
facility is fully drawn. Further information on the Olaroz Project
joint venture agreement and associated financing agreements is
available in the Company's announcements of 17 October 2012 and 7
December 2012.  
Salar de Olaroz Construction Update 
Construction of the Olaroz lithium project officially began on 21
November, 2012. Progress has been swift due in a large part to the
preparation and planning that took place in the preceding year.
Sinclair Knight Merz, with the assistance of INFA, a well-respected
Argentine engineering group, completed detailed engineering for all
areas of the operation, including brine extraction, transport and
evaporation, the lithium carbonate plant and key areas of the
re-purification and micronizing circuits. The procurement process was
also well advanced with all main suppliers identified and with many
construction and supply contracts at an advanced stage of negotiation
or ready for awarding by the construction commencement date. 
In addition, prior to official construction start, various aspects of
site preparation had been advanced, including the drilling of fresh
water bores and pumping station and the time consuming removal of
scrubby vegetation, "tolar", from the area of the evaporation ponds
prior to earth moving. Since then, numerous contracts with a total
value of US$45m have been executed, or are ready for execution. These
include the earth moving contracts for the construction of the 4.2
square kilometres of evaporation pond and road construction for the
bore field access road across the salt lake (which will allow
production bores to be drilled), the drilling contract for sixteen
200m production bores, purchase of 37km of pipeline for gas supply,
and the establishment of the construction camp, fuel and water
supply. All major contracts awarded to this point have been on or
under budget. 
Since start of official construction, and taking into account the
Christmas break, significant progress has been made on-site as
follows: 


 
--  The establishment of the construction camp at Olaroz, and the renting of
    supplementary accommodation at the nearby town of Susques for first
    stage construction crews 
--  Mobilization of earth moving equipment and commencement of works 
--  The clearing of tolar over approximately 50% of the evaporation pond
    area (2 sq km) and the commencement of earth works for evaporation pond
    construction  
--  Establishment of a long term water supply to be used both for both
    domestic and construction purposes 
--  Establishment of fuel supply/storage and telecommunications 
--  The construction of 50% of the access roads on the salar to the bore -
    field area 

 
Currently 142 construction workers are at site with a peak maximum
expected of 400 by mid-2013.  
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 unique community and shared value policy continues as
a key success factor, training local people with supervision by high
quality experienced professionals.  
Salar de Cauchari Potassium-Lithium Project (Orocobre 85%) 
On 22 October, the Company announced the completion of the maiden
resource estimate at its 85% owned Cauchari lithium-potash properties
("Cauchari") in Jujuy Province, Argentina. Cauchari is located
approximately 20km south of the Company's flagship Olaroz Project.  
From October to December 2011 the company drilled five diamond and
one rotary vertical drill holes in the Cauchari properties, followed
by chemical analyses of the brine and porosity testing. This work
provides the basis of the resource estimate, by independent
consulting hydro geologist Murray Brooker, and other conclusions
presented in the announcement.  
Mr. Brooker has estimated an inferred resource in two adjoining areas
of the salar, with a total 230 million cubic metres of brine at
average grades of 380 mg/L lithium and 3700 mg/L potassium. This is
equivalent to 470,000 tonnes of lithium carbonate and 1.6 million
tonnes of potash (potassium chloride) based on 5.32 tonnes of lithium
carbonate being equivalent to one tonne of lithium and 1.91 tonnes of
potash being equivalent to one tonne of potassium. Details are given
in the table below. 
To view Table 1, please visit the following link:
http://media3.marketwire.com/docs/850306_table_1.pdf. 
Due to differences in drill-hole depths the resource has been divided
into a northern and a southern resource area. The resource has been
estimated using a conservative approach limited by the depth of
drilling, with the estimate extending to 170 m depth in the northern
area of the properties and 50 m depth in the southern area.  
The resource boundaries are constrained by the company's property
holdings, drilling results and geophysical survey interpretation. No
internal cut-off boundaries have been used because both the Company
and Competent Person/Qualified person consider it is inappropriate to
apply them in a fluid resource where extraction will cause mixing. No
external cut off was defined for the resource, due to the limited
drilling and pit sampling completed on the project to date. The
property boundaries were used as the western, northern and southern
boundaries to the brine resource. Hole CAU006R was excluded from the
resource due to a different drilling and sampling methodology and sub
100 mg/l Li composite sample results.  
Exploration Target  
Based on available geophysics, geology and geochemistry it has been
is possible to define an exploration target beneath the resource
outlined in Table 1. It must be stressed that an exploration target
is not a mineral resource. The potential quantity and grade of the
exploration target is conceptual in nature, and there has been
insufficient exploration to define a Mineral Resource in the volume
where the Exploration Target is outlined. It is uncertain if further
exploration drilling will result in the determination of a Mineral
Resource in this volume, however available information suggest this
is likely.  
The contained lithium in the exploration target (combining values for
the northern and southern areas - see Table 2) ranges from the Upper
Assumption case of 2.6 mt of lithium carbonate and 9.2 mt of potash
to the Lower Assumption case of 0.2 mt of lithium carbonate and 0.5
mt of potash.  
It must be stressed the exploration target is based on a series of
assumptions and future drilling is required to determine the brine
grade and formation porosity (Sy) values to establish whether a
resource can be defined.  
To view Table 2, please visit the following link:
http://media3.marketwire.com/docs/850306_table_2.pdf. 
The brine body has attractive chemistry, with a low magnesium to
lithium ratio (2.8) in the five diamond holes and a high potassium to
lithium ratio (10). The sulphate to lithium ratio averages 61 in
diamond holes CAU001D-4D, rising to 114 in hole CAU005D in the
eastern part of the resource area. Initial evaluation of the brine
chemistry suggests high recoveries of lithium could be expected using
a process route similar to that at the adjacent Olaroz project.  
Considering the similarities and close proximity of the Cauchari and
Olaroz projects, there are compelling synergies including the
expected use of shared infrastructure and processing plants, and it
is likely that any future development of the Cauchari brines would
use the Olaroz facilities. Consequently, from this point forward the
company considers the Cauchari project and its brine body part of the
larger Olaroz project. In the future, resources for Cauchari will be
reported as a discrete part of the overall Olaroz project resources.  
Further technical information on the Cauchari maiden resource
estimate is available in the Company's 22 October, 2012 announcement. 
Borax Argentina 
Borax Argentina has extensive operations and has a fifty year
production history producing borax chemicals, boric acid,
"boro-glass" and boron minerals. Production currently comes from
three principal mines at Tincalayu, Sijes and Porvenir, concentrators
at the first two with a chemicals plant at Campo Quijano producing
refined products.   
There are historical estimates on the mineralisation at these mines
and at two undeveloped deposits. These form the basis for developing
plans for the business.   
Operations  
The Borax Argentina operation performed as planned and expected over
the quarter. At Tincalayu, 5,139 tonnes of tincal mineralisation was
mined, 37,009 tonnes of hydroboracite, ulexite and colemanite
mineralisation was mined at Sijes and 25,359 tonnes of ulexite
mineralisation was mined at Porvenir during the quarter.   
Approximately 10,007 tonnes of combined products was sold.  
During the quarter, work commenced to develop the programmes to
convert some of the historical estimates to JORC/NI43-101 compliant
resources. The first phase will commence this quarter and be focussed
on assessing database quality and re-logging core. During the quarter
a number of studies were also initiated to look at operational
improvements to reduce unit costs.  
Corporate  
Institutional Capital Raise & Shareholder Purchase Plan  
On 5 November, 2012, the Company announced the completion of a
placement of 12.38 million ordinary shares to institutional investors
at an issue price of A$1.70 per share, raising A$20 million net
proceeds. The issue price represented an 8.0% discount to the ASX
closing price prior to the Company entering into a trading halt on 1
November, 2012. The non-underwritten placement was significantly
oversubscribed, with participating institutional investors from
Australia, Hong Kong, the United Kingdom and the United States. The
offering investment dealer syndicate was led by Canaccord Genuity
(Australia) Ltd., and also included Cormark Securities Inc. (who
acted as a lead Canadian Manager), and Patersons Securities Ltd.  
Also on 5 November, 2012 the Company announced that it would be
offering eligible existing shareholders an opportunity to participate
in a Shareholder Purchase Plan ("SPP") to raise up to $5 million at
the same issue price as the institutional placement. Subsequently, on
30 November, the Company announced that it had completed the SPP
after receiving applications for 2,197,026 shares, raising
A$3,734,944.  
The proceeds of the institutional and SPP capital raises will be used
to fund Orocobre's equity contribution for the construction of the
Olaroz lithium project, as well as funding Borax Argentina
initiatives and general corporate purposes, including working
capital.  
New Appointment to Board of Directors  
On 30 November, 2012 the Company announced the appointment of Mr.
Robert Hubbard to Orocobre's Board of Directors. Mr. Hubbard replaces
Mr. Neil Stuart who retired from the Board following the 2012 Annual
Meeting of Shareholders on 30 November, 2012, after serving as the
company's distinguished founder and valued member of the Board since
the Company's inception. 
Mr. Hubbard brings a wealth of experience and pertinent knowledge to
the Orocobre Board. He will be retiring in March 2013 from
PricewaterhouseCoopers, having served for over 20 years as a partner
at the firm. During his time as a PwC partner, he served as auditor
for some of Australia's largest companies and acted as head of the
advisory and assurance practices of PwC Brisbane. In addition to his
general Orocobre Board duties, Robert will also chair the Company's
Audit Committee. 
New Executive Appointments 
On 21 January, 2013 the Company announced the appointment of Mr. Neil
Kaplan to the position of Chief Financial Officer and Mr. David Hall
to the position of Business Development Manager. 
Neil Kaplan brings a wealth of knowledge to the Company with over 20
years of experience in managerial and finance positions obtained on
four different continents. Neil's experience in the resources sector
was obtained working in executive financial roles for Glencore
International and formerly listed Coalcorp Mining, both based in
Columbia. 
David Hall has extensive business management, market development,
marketing and logistics experience in domestic and international
chemical and industrial minerals markets across a wide range of
products and geographies. David served for 19 years with ICI
Australia and Orica Australia in a number of roles in both Brisbane
and Melbourne and more recently two years with Queensland Magnesia. 
Orocobre Named Argentina's Mining Company of the Year 2012 
On 19 November, 2012 the Company announced that it has been named the
"Mining Company of the Year 2012" by Argentine mining magazine
Panorama Minero and Fundacion para el desarrollo de le Mineria
Argentina ("Fundamin"). This prestigious honour was awarded at
Panorama Minero's 36th anniversary dinner on 14 November in Buenos
Aires. 
Cash Position  
At the end of the quarter, the company had a strong cash position of
A$38.9 million. 
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 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 is building in partnership with Toyota Tsusho
Corporation the first large-scale, de-novo brine based lithium
project in 20 years at its flagship Salar de Olaroz resource, with
projected production of 17,500 tonnes per annum of low-cost battery
grade lithium carbonate scheduled to commence in Q2 2014. The Company
also wholly-owns Borax Argentina, an important regional borate
producer. Orocobre has recently been included in the S&P/ASX 300
Index. For further information, please visit www.orocobre.com. 
Technical Information, Competent Persons' and Qualified Persons
Statements  
The information in this report that relates to Exploration Results or
Mineral Resources is based on information prepared by, or under the
supervision of Mr. Richard Seville who is a member of the
Australasian Institute of Mining & Metallurgy. Mr. Seville is an
executive director of Orocobre Ltd and has sufficient experience
which is relevant to the style of mineralisation and type of deposit
under consideration and to the activity which they are undertaking to
qualify as Competent Persons as defined in the 2004 Edition of the
'Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves'. Mr. Seville consents to the inclusion in
this announcement of the matters based on his information in the form
and context in which it appears.  
The technical information in respect of the Salar de Cauchari initial
resource estimate has been prepared by Murray Brooker of Hydrominex
Geoscience. Murray Brooker is a geologist and hydro geologist and is
a Member of the Australian Institute of Geoscientists. Murray has
sufficient relevant experience to qualify as a competent person as
defined in the 2004 edition of the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves. He is also a
"Qualified Person" as defined by Canadian Securities Administrators'
National Instrument 43-101. Murray Brooker consents to the inclusion
in this announcement of this information in the form and context in
which it appears.  
Additional information relating to the Company's projects is
available in "Technical Report - Salar de Olaroz Lithium-Potash
Project, Argentina" dated May 30, 2011, (the Olaroz Report), the
"Technical Report - Salinas Grandes Project" dated April 30, 2010 and
the "Technical Report - Salar de Cauchari Project, Argentina" dated
April 30, 2010, respectively, which have each been prepared by John
Houston, Consulting Hydrogeologist, together with, in the case of the
Olaroz Report, Mike Gunn, Consulting Processing Engineer, in
accordance with NI 43-101.  
Information in this announcement relating to the testing results of
Lithium Americas Corp. has not been verified by Orocobre, and such
information is not necessarily indicative of results that will be
obtained by Orocobre at the Cauchari Project.  
Caution Regarding Forward-Looking Information  
This report contains "forward-looking information" within the meaning
of applicable securities legislation. Forward-looking information
contained in this report may include, but is not limited to, the
financing of the Olaroz Project, the completion of definitive lending
documentation with Mizuho and JOGMEC the provision of required
guarantees by TTC and JOGMEC, the commencement and completion of
construction at the Olaroz Project and the timing thereof, the
commencement of commercial production at the Olaroz Project and the
timing thereof, the estimated capital cost of the Olaroz Project, the
design production rate for lithium carbonate and potash at the Olaroz
Project, the expected brine grade at the Olaroz Project, the expected
operating costs at the Olaroz Project and the comparison of such
expected costs to expected global operating costs, and the ongoing
working relationship between Orocobre and the Province of Jujuy, the
estimation and realization of resources at the Cauchari project, the
viability, recoverability and processing of such resources, potential
operating synergies between the Cauchari project and the Olaroz
project, and other matters related to the development of the Cauchari
project.  
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
that required guarantees will not be provided or that the project
financing will otherwise not be completed with Mizuho Corporate Bank
and JOGMEC; that further funding may be required, but unavailable,
for the ongoing development of the Company's projects; fluctuations
or decreases in commodity prices; 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 construction and development
of the Olaroz Project; unexpected capital or operating cost
increases; uncertainty of meeting anticipated program milestones at
the Olaroz Project; general risks associated with the feasibility and
development of the Olaroz Project; that further funding may be
required, but unavailable, for the ongoing development of the
Company's projects; changes in government regulations, policies or
legislation; fluctuations or decreases in commodity prices; the
possibility that required permits may not be obtained; uncertainty in
the estimation or economic viability of mineral resources; general
risks associated with the feasibility and development of the Cauchari
project; unexpected capital or operating cost increases; the risk
that the Olaroz project may not be completed; the risk that Orocobre
will not be able to negotiate a arrangements to treat Cauchari brines
at Olaroz with the Olaroz joint venture partner, Toyota Tsusho
Corporation; uncertainty of meeting anticipated program milestones;
as well as those factors disclosed in the Company's Annual
Information Form for the year ended June 30, 2012 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 Company's ability to
carry on its exploration and development activities, the timely
receipt of required approvals, the prices of lithium and potash, the
ability of the Company to operate in a safe, efficient and effective
manner and the ability of the Company to obtain financing as and when
required and on reasonable terms. 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. 
ABN 31 112 589 910
Contacts:
Orocobre Limited
David Hall
Business Development Manager
M: + 61 407 845 052
dhall@orocobre.com 
Orocobre Limited
James Calaway
Chairman
M: + 1 (713) 818 1457
jcalaway@calawayinterests.com
www.orocobre.com
 
 
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