MILTON, QUEENSLAND--(Marketwired - Nov. 23, 2016) - Orocobre Limited (ASX:ORE)(TSX:ORL) (Orocobre or the Company) today announced that it will divest a number of lithium brine exploration projects which are currently held through Orocobre's Argentine subsidiary South American Salars SA (SAS) to Canada's Advantage Lithium Corp. (TSX VENTURE:AAL) (Advantage Lithium).
Under the terms of a Letter of Intent (LOI) executed by the parties, Advantage Lithium will issue to Orocobre 40,622,200 common shares valued at approximately US$37 million as at 22 November 2016 in consideration for the acquisition of the exploration projects.
Advantage Lithium is required to complete an equity financing of between US$15,000,000 and US$25,000,000 jointly managed by Dundee Securities Ltd and Canaccord Genuity Corp at an issue price of C$1.00. The funds will allow Advantage Lithium to rapidly advance the exploration projects in the northern provinces of Argentina. Orocobre's shareholding in Advantage Lithium post raising will represent between 31.1% and 34.6% of the outstanding common shares (on a fully diluted basis).
Orocobre will not participate in the equity financing.
Following execution of a Definitive Agreement, anticipated to be finalised in the next month, Orocobre will be entitled to appoint two nominees to the Board of Directors of Advantage Lithium, which on completion will comprise six Board members.
The LOI with Advantage Lithium includes exploration projects with a total area of approximately 85,000 hectares in the northern Argentine provinces of Jujuy, Salta and Catamarca in Argentina's lithium triangle.
Orocobre and Advantage Lithium will enter a 50/50 joint venture for the more advanced Cauchari Project. Advantage Lithium will earn a further 25% interest in this property by the expenditure of US$5m over three years or completion of an NI 43-101 compliant feasibility study in that period.
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* Advantage Lithium will have an initial 50% interest that can be increased to 75% (see paragraph below)
As detailed in the accompanying ASX/TSX announcement headed "Orocobre partners with Advantage Lithium - Technical Details of Cauchari Flagship Lithium Asset" the Cauchari project hosts a near-surface, inferred resource containing approximately 470,000 tonnes lithium carbonate equivalent (LCE) (230 million cubic meters of brine at average grades of 380 mg/L lithium). Lying beneath the inferred resource is a large exploration target of between 0.25 million tonnes and 5.6 million tonnes of lithium carbonate equivalent based on a range of porosity and grade possibilities to between 220 metres and 450 metres depth.
Orocobre will retain a 1% gross royalty on production from the Cauchari properties, and will have rights of first refusal on future brine production.
The Cauchari project is located 20 kilometres south of Olaroz and adjacent to the development project of Lithium Americas Corp and SQM. The newly created Joint Venture between Orocobre and Advantage Lithium will benefit from its proximity to the Olaroz Lithium Facility and from the Joint Venture's ability to access the experience of Orocobre in lithium project development.
CEO and Managing Director, Richard Seville said,
"By partnering with Advantage Lithium this transaction will enable the high potential assets in our exploration portfolio to be developed and advanced without the need for any further input of capital or management time by Orocobre whilst allowing us to maintain our focus on our current production and expansion plans at Olaroz and Borax Argentina.
Our decision to partner with Advantage Lithium attests to the high regard with which we hold the Advantage Lithium team at both the Board and technical level and we look forward to working closely with them."
About Advantage Lithium Corp.
Advantage Lithium Corp. is a resource company specializing in the strategic acquisition, exploration and development of lithium properties and is headquartered in Vancouver, British Columbia. Common Shares are listed on the TSX Venture Exchange under the symbol "AAL". The company is earning an interest from Nevada Sunrise Gold Corp., in a portfolio of five lithium brine projects in the Clayton and Lida Valley regions of Nevada, USA, together with certificated water rights in the Clayton Valley. The company has also entered an LOI agreement to earn interest from Radius Gold Inc. in four lithium brine projects in the states of Chihuahua and Coahuila, Northwest Mexico. In addition, the company has signed a definitive agreement to acquire 100% of the Stella Mary's lithium brine project in Argentina's Lithium Triangle. Further information about the company can be found at www.advantagelithium.com.
Details of the Letter of Intent
The terms and conditions of the acquisition will be set out in the Definitive Agreement.
As consideration for the projects, Advantage Lithium will issue to Orocobre 40,622,200 common shares in the capital of the Company which will represent no less than 31.1% of the outstanding common shares of Advantage Lithium on completion of the capital raising (calculated on a fully-diluted basis).
The completion of the acquisition (Closing) will occur on the second business day after satisfaction or waiver of the conditions to Closing as set out in the Definitive Agreement, or such other date as Orocobre and Advantage Lithium may agree (and in any event within 90 days unless otherwise agreed).
Closing is subject to a number of conditions that will be set out in the Definitive Agreement, including:
- the receipt of all required regulatory approvals, including the approval of the TSX Venture Exchange;
- the receipt of all shareholder and Director approvals required by Advantage Lithium;
- the completion of satisfactory due diligence by each of Advantage Lithium and Orocobre;
- completion by Advantage Lithium of an equity financing to raise gross proceeds of not less than US$15,000,000 (and a maximum of US$25,000,000);
- completion of a technical report on the exploration projects, prepared in compliance with National Instrument 43-101 Standards of Disclosure for Mineral Projects; and
- no material adverse change in the business, operations, results, prospects, properties or assets of Advantage Lithium having occurred prior to Closing.
The parties will enter into voluntary escrow agreements in respect of the shares to be issued to Orocobre and the shares held by current Advantage Lithium insiders. Final terms of the escrow agreements will be detailed in the Definitive Agreement.
Orocobre will have a pre-emptive right to maintain its proportionate interest in Advantage Lithium by participating in future offerings of securities by the Company provided that Orocobre holds at least 10% of the issued and outstanding common shares of Advantage Lithium. Orocobre will also have the Board representation rights described above.
Orocobre will have a right of first refusal over any direct or indirect sale by Advantage Lithium of all or any portion of the Cauchari properties, and Orocobre will be entitled to re-acquire the Cauchari properties pursuant to an agreed valuation process in the event of a change of control of Advantage Lithium.
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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 chemicals and 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 has built, in partnership with Toyota Tsusho Corporation and JEMSE, the first large-scale, greenfield brine based lithium project in approximately 20 years at the Salar de Olaroz with planned production of 17,500 tonnes per annum of low-cost battery grade lithium carbonate.
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 such as Salar de Atacama, Salar de Hombre Muerto and Salar de Rincon 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.
- 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 Company continues to follow the community and shared value policy to successfully work with suppliers and the employment bureau to focus on the hiring of local people from the communities of Olaroz, Huancar, Puesto Sey, Pastos Chicos, Catua, Susques, Jama, El Toro, Coranzulí, San Juan and Abrapampa. 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 community and shared value policy continues to be a key success factor, training local people under the supervision of high quality experienced professionals.
The Company also wholly-owns Borax Argentina, an important regional borate producer.
Technical Information, Competent Persons' and Qualified Persons Statements
The technical information in this announcement has been prepared by Murray Brooker of Hydrominex Geoscience. Murray Brooker is a geologist and hydrogeologist 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 2012 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 on the Company's website 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.
Caution Regarding Forward-Looking Information
This news release contains "forward-looking information" within the meaning of applicable securities legislation. Forward-looking information contained in this release may include, but is not limited to, the divestment of exploration projects to Advantage Lithium as described in this release, the execution of the Definitive Agreement with Advantage Lithium, the completion of commissioning, the commencement of commercial production and ramp up of the Olaroz Lithium Facility and the timing thereof, the cost of construction relative to the estimated capital cost of the Olaroz Lithium Facility, the meeting of banking covenants contained in project finance documentation, the design production rate for lithium carbonate at the Olaroz Lithium Facility, the expected brine cost and grade at the Olaroz Lithium Facility, the expected operating costs at the Olaroz Lithium Facility and the comparison of such expected costs to expected global operating costs, the estimation and conversion of exploration targets to resources at the Olaroz Lithium Facility, the viability, recoverability and processing of such resources, the potential for an expansion at the Olaroz Lithium Facility, the capital cost of an expansion at the Olaroz Lithium Facility; the future performance of the relocated borax plant and boric acid plant, including without limitation the plants estimated production rates, financial data, the estimates of mineral resources or mineralisation grade at Borax Argentina mines, the economic viability of such mineral resources or mineralisation, mine life and operating costs at Borax Argentina mines, the projected production rates associated with the borax plant and boric acid plant, the market price of borate products whether stated or implied, demand for borate products and other information and trends relating to the borate market, taxes including recoveries of IVA, royalty and duty rate and the ongoing working relationship between Orocobre and the Province of Jujuy, TTC and Mizuho Bank.
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 of the conditions precedent in the LOI and/or Definitive Agreement described in this press release not being satisfied; the risk of further changes in government regulations, policies or legislation; the possibility that required concessions may not be obtained, or may be obtained only on terms and conditions that are materially worse than anticipated; that further funding may be required, but unavailable, for the ongoing development of the Company's projects; fluctuations or decreases in commodity prices and market demand for product; 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 commissioning and ramp up of the Olaroz Lithium Facility to full capacity; unexpected capital or operating cost increases; uncertainty of meeting anticipated program milestones at the Olaroz Lithium Facility; general risks associated with the further development of the Olaroz Lithium Facility; general risks associated with the operation of the borax plant or boric acid plant; a decrease in the price for borates resulting from, among other things, decreased demand or an increased supply of borates or substitutes, as well as those factors disclosed in the Company's Annual Report for the year ended June 30, 2016 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 timely receipt of required approvals and completion of agreements on reasonable terms and conditions; the ability of the Company to obtain financing as and when required and on reasonable terms and conditions; the prices of lithium, potash and borates; market demand for products and the ability of the Company to operate in a safe, efficient and effective manner. 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