Talison Lithium Ltd. (TLH), the world’s largest producer of the material used to power iPads and hybrid vehicles, said it’s studying debt funding for a proposed plant in Western Australia that may cost as much $250 million.
The plant would produce 20,000 metric tons of lithium carbonate a year, allowing Talison to widen its customer base, Peter Oliver, chief executive officer of the Perth-based company, said in an interview in London today. It plans to make an investment decision on the plant by year end.
“We have quite a substantial cash balance at the moment, we’re generating good cash and we’re out at the moment looking at debt to fund the rest,” Oliver said. “Ultimately, there may be an equity component. But certainly cash, cash-flow and debt are the primary sourcing of funding.”
Talison and three South American producers dominate global supply, controlling 94 percent of the market, according to the company. Demand for lithium may double by 2020 to 300,000 tons a year largely because of increasing use in hybrid-electric vehicles and consumer electronics, Dahlman Rose & Co. analysts Anthony Young and Anthony Rizzuto said in a May 16 note in which they gave the company a buy rating.
Talison, which produces 32 percent of the world’s supply, has existing accords with Sojitz Corp. (2768) and Mitsui & Co. to discuss marketing and distribution in Japan and is also in talks with potential buyers in South Korea, Oliver said today. The company said last week it completed an expansion at its Greenbushes mining operation that has doubled its output capacity.
“We are clearly looking in Asia,” Oliver said of possible lenders for the debt component of the funding. “Most of our exposure is in the U.S., but we’ve got Australian banking support as well.”
Talison is seeking to build the plant in the Kwinana Industrial Area of Western Australia, close to the port of Fremantle. It had A$85 million ($85 million) in cash at March 31, according to a corporate presentation. The cost may be $200 million to $250 million, Oliver said.
Lithium is also used in glass, ceramics, pharmaceuticals and aerospace alloys. Talison was unchanged at C$3.37 at 11:47 a.m. in Toronto trading. The stock has dropped 23 percent in the past year.
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