Orocobre Ltd. - Olaroz Lithium Facility Operations Update

Brisbane, Australia (ABN Newswire) - Orocobre Ltd. (ASX:ORE) (TSE:ORL) (Orocobre or the Company) wishes to advise on progress at the Olaroz Lithium Facility.


Highlights:

- Production ramp up continues with production of approximately 256 tonnes of lithium carbonate in September, in line with forecast. Of this total there was approximately 50 tonnes of saleable lithium carbonate produced in the month that was recovered within the purification circuit.

- Modifications made to the purification circuit to attain the required temperature reduction to achieve efficient dissolution of the primary lithium carbonate in the absorption circuit have been successful. Further simple enhancements are required to gain the full benefit of these changes.


Production update

Production at the Olaroz Lithium Facility continued to increase in September with 256 tonnes of lithium carbonate produced. Of this total there was approximately 50 tonnes of saleable lithium carbonate recovered in the purification circuit under the changed operating conditions after the modifications to the cooling of the return solutions were made, as discussed below.


De-bottlenecking progress

Since the last update, progress continued on the de-bottlenecking program.

- Heat Exchangers:

Elevated temperatures in the return solutions in the purification circuit had made the absorption part of the circuit approximately 10 degrees higher than target, thus limiting lithium carbonate dissolution (i.e. the level of lithium carbonate able to be held in solution). Successful modifications to the plant have now been completed resulting in reductions in temperature to 15oC (better than the target range of 18-20oC) being achieved through use of the cold incoming brine as cooling fluid.

However, the use of cold brine in cooling has resulted in gradual blocking of the heat exchanger plates on the cold brine side causing a reduction of availability in the circuit by 30%. This blocking occurs from crystals pumped from the concentrated brine feed pond and crystal precipitation from the brine.

The blocking of the heat exchanger plates results in inconsistent temperatures leading to the collection of solid lithium carbonate in the tanks after the absorption stage (the ~50 tonnes of product referred to earlier). To solve this issue there are two steps required:

1. flocculants will be used to settle the suspended magnesium, sodium, boron and calcium salts in the pond to stop crystals being pumped from the concentrated brine feed pond to the lithium carbonate plant. This will allow a clarified brine to be fed to the lithium carbonate plant and reduce the incidence of crystal formation on the heat exchanger plates; and

2. additional heat exchangers will be installed in parallel to those already installed. This will allow the shutdown and cleaning of one heat exchanger at a time without impacting on production.

The use of flocculants in the concentrated brine feed pond to floc and settle the suspended salt crystals will produce a clarified brine and a lower loading of salt crystals in the brine being fed into the plant resulting in a slower rate of crystal formation and slower build up on the heat exchanger plates. The installation of two additional heat exchangers also allows cleaning to occur without impacting on the production rate and effectively provides some latent heat exchanger capacity.

These enhancements will be completed by early December. The maximum production achievable until these modifications are completed will be ~22 tonnes of lithium carbonate per day with ~30 tonnes per day achievable after optimizing existing available heat through the circuit.

- Magnesium and Calcium removal by Centrifuges:

The first of the two centrifuges continues to operate well with a capacity of 40m3/hr of brine feed into the plant. To reach the nameplate flow rate a second centrifuge, which is already on site, will be installed in November.

- Outotec Polishing Filters:

The replacement of the Outotec polishing filters by centrifuges to remove calcium and magnesium allowed these filters to be used to provide additional filtering capacity to recover lithium carbonate solids remaining in the circuit prior to discharge from the plant. This modification was completed during September. The improvement in recovery was less than expected and highlighted that:

a) solids losses directly from the primary reactors were minimal, which is positive

b) lithium carbonate solids were accumulating from the plant drainage in a large concrete environmental tank prior to discharge from the plant. Subsequent investigations have indicated a potential additional 150 tonnes of saleable lithium carbonate in this tank that will now be recovered and sold. The system will also be changed to stop lithium carbonate reporting to this tank over coming weeks.


- Boiler Increase:

The additional boiler will be installed by the end of November. However, lead times for importing some specialist piping and equipment that cannot be sourced locally and installation of same will delay the commissioning of the new boiler to early January. The increase in boiler capacity will permit the crystallizers and purification circuit to meet full capacity.


Production Guidance and Brine Inventory

The Olaroz Lithium Facility will reach breakeven point on an operating cost basis (net of taxes paid or reimbursed), when production reaches approximately 650 tonnes per month, subject to variability in final average sales price. The Company has previously advised that this would occur in October 2015 however, due to the engineering matters discussed above, this is now expected in December 2015.

All de-bottlenecking projects impacting production are now expected to be completed by early January 2016 permitting the plant to enter the final stage of ramp up and achievement of the nameplate production run rate. The timing of achievement of the nameplate production run rate is dependent upon the successful optimisation of operating practice once the debottlenecking rectifications are complete. Current brine inventory is up to approximately 40,000 tonnes of lithium carbonate equivalent (LCE) up from approximately 32,000 tonnes of LCE in June. There are no material changes to the capital cost estimates previously announced.

View the Debottlenecking timeline figure, in link below.


Financing

At the end of September the Company had approximately A$10m in free cash and US$37.5m in Standby Letters of Credit (SBLCs) to support the working capital requirements of the Olaroz Lithium Facility. Plans are advanced to enable better value to be extracted from these instruments and it is expected that Orocobre will be able to provide Sales de Jujuy S.A. (SDJ) with the necessary financial support through to positive operating cashflow without recourse to further funding. In March 2016 SDJ will make the next principal and interest payment of approximately US$13m. The Company and its joint venture partners are assessing various project level options, including working capital facilities and product prepayment arrangements with customers with the objective that any part of this payment that is not met by operating surpluses is otherwise covered.


Sales Orders

Commercial shipments of lithium carbonate have been and continue to be dispatched from the Olaroz Lithium Facility to Europe, Asia and the USA. All product that has been reported as produced is saleable product and has been sold or committed to a customer's purchase order. The inventory level held at any given time is minimal. There is a lag between production of product and the sale being recorded as each export order needs to be have a vessel booked, a document bundle produced (including bill of lading and commercial invoice) and be transported to the port. As previously advised samples have been provided to both industrial and battery sector customers.


Market Conditions

Prices in recent times have been steadily increasing to over US$6,000/tonne with further increases expected into CY2016 and beyond as lithium market conditions continue to tighten. Strong market demand and supply side constraints are resulting in continued upward pressure on market prices for lithium carbonate. FMC Corporation (NYSE:FMC) announced a 15% price increase in September for lithium products, effective 1st October 2015. The market for lithium carbonate is predominantly with downstream value-add producers of lithium compounds. Pricing for lithium carbonate is at a modest discount to the market price of dry lithium carbonate and there is strong ongoing and growing demand in this segment.


Managing Director Comments

Managing Director, Richard Seville, said, "We remain positive about our progress at the Olaroz Lithium Facility. The more we progress, the better we understand what remains to be done and the level of uncertainty reduces. We have continued to make rapid advances in removing bottlenecks, we improve our "know how" and operating practices on a daily basis and our revenues are rapidly increasing in line with increasing production and rising market prices."

Simplified Lithium Carbonate Plant Process Diagrams are on page 6, in the link below.

To view the figures and diagrams, please visit:
http://media.abnnewswire.net/media/en/docs/ASX-ORE-886165.pdf


About Orocobre Limited:

Orocobre Ltd. is listed on the Australian Securities Exchange and Toronto Stock Exchange (ASX:ORE) (TSE:ORL) (OTCMKTS:OROCF), 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 has built, in partnership with Toyota Tsusho Corporation and JEMSE, the first large-scale, greenfield brine based lithium project in 20 years at the Salar de Olaroz with planned production of 17,500 tonnes per annum of low-cost battery grade lithium carbonate. The full monthly production rate is expected to be reached in the last quarter 2015.



Contact:

Orocobre Ltd.
Richard Seville, Managing Director
T: +61 7 3871 3985 M:-+61 419 916 338
E: reseville@orocobre.com

David Hall, Business Development Manager
T: +61 7 3871 3985, M: +61 407 845 052
E: dhall@orocobre.com

North America
James Calaway, Chairman
M: +1 (713) 818 1457
E: jcalaway@orocobre.com