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Pilbara finalises downstream JV with POSCO

26th October 2021

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Lithium miner Pilbara Minerals has finalised its joint venture (JV) with Korean major POSCO for the development of a downstream lithium chemicals facility in South Korea.

Under the terms of the agreement, the two companies would jointly construct and operate a 43 000 t/y lithium hydroxide monohydrate (LHM) conversion facility.

The conversion facility will consist of two production trains, each with a 21 500 t/y LHM production capacity, using POSCO’s leading patented purification technology, which has been developed by POSCO over the last ten years, and which will be licensed on a non-exclusive basis to the JV.

Based on studies undertaken by POSCO the capital development costs for the conversion facility are currently estimated at a prefeasibility study level to be between $600-million and $650-million. After allowing for initial working capital and pre-production financing costs, the total JV funding requirement is expected to be between $700-million and $750-million.

Operating costs of the conversion facility are expected to be largely consistent with industry peers.

POSCO has recently acquired the site for the conversion facility in the Gwanyang province of South Korea and is currently undertaking early works and the detailed engineering required to finalise the design and costing of the conversion facility, ahead of construction which is targeted to commence during the March quarter 2022.

Final estimated capital development costs, operating costs and operating parameters are expected prior to the commencement of construction following completion of this work.

Debt funding for the JV is expected to be secured from Korean commercial banks following the establishment of the JV and completion of the early works and detailed engineering. A gearing ratio of some 50% of external debt has been agreed between parties, but with the ability for this to increase to 65% if required.

This ensures that Pilbara Minerals’ initial 18% equity participation in the JV will be largely funded through the previously announced A$79.6-million, five-year convertible bond agreement being provided by POSCO, the miner said on Tuesday.

Funds will be drawn down under the convertible bond agreement following formation of the JV and completion of other conditions precedent, which are expected to be satisfied during the December quarter 2021.

Under revised offtake terms, Pilbara Minerals will supply 315 000 t/y of chemical grade spodumene concentrate on commercial terms to the conversion facility, which will be sourced from the existing installed production capacity at the Pilgangoora project, at prevailing market prices for chemical grade spodumene concentrate.

In recognition of the annual offtake quantity increasing from 240 000 t/y to 315 000 t/y for the expanded 43 000 t/y LHM conversion facility, the JV will provide Pilbara Minerals with a second ranking secured $25-million product prepayment facility which may be used for general working capital or to partly fund any future expansions of the Pilgangoora project.

The prepayment will be conditional on any regulatory and other approvals including the consent of Pilbara Minerals’ senior secured lenders under its senior secured syndicated finance facilities.

The 315 000 t/y offtake agreement will not impact the company’s ability to continue to supply product under its existing offtake arrangements with other customers.

“We are delighted to have executed the shareholders agreement with POSCO to jointly own and develop a 43 000 t/y chemical conversion facility in South Korea which will form an important part of POSCO’s overall supply chain for the lithium raw materials market in South Korea and abroad,” said Pilbara Minerals MD and CEO Ken Brinsden.

“This agreement further cements our long-standing relationship with a world-class strategic partner, in the rapidly growing South Korean lithium raw materials market. This JV will give Pilbara Minerals significant exposure to one of the world’s most dynamic and fastest growing markets for lithium chemicals. Production is expected to commence from the second half of 2023, which should coincide with burgeoning global lithium chemicals demand.

“We are very pleased to have the opportunity to partner with a company like POSCO and the supply of spodumene concentrate to the JV chemical plant will also have the benefit of further diversifying our global sales arrangements over time.”

The JV will be named POSCO-Pilbara Minerals Lithium Solution Co, with its establishment consistent with Pilbara Minerals’ long-term strategy to become a fully integrated lithium raw materials company with a globally diversified customer base.

The conversion plant will play an integral role in POSCO’s overall strategic objective of becoming one of South Korea’s largest battery materials producers, supporting South Korea’s rapidly growing market for lithium-ion batteries for electric vehicles, energy storage and other mobile power applications.

Edited by Creamer Media Reporter

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