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Orocobre Limited Argentine lithium deal critical to Toyota hybrid auto development


A deal between Australian explorer Orocobre (ASX: ORE) and a subsidiary of the world's largest automaker Toyota  for Argentina's Salar de Olaroz Lithium-Potash Project is considered an important step in the future use of lithium-ion batteries in electric cars.

Toyota Tsusho emerged the winner in an army of suitors representing auto makers, battery manufacturers and chemical groups all anxious to secure a dependable supply of lithium. Toyota Motors owns 22% of Toyota Tsusho, which is the procurement company for Toyota Motors.

Current hybrid vehicles use nickel-metal hydride batteries, which don't store as much power as lithium-ion batteries. Toyota is launching plug-in hybrids and battery electric cars beginning in model year 2012. The Prius HV is Toyota's first generation lithium-ion battery.

Toyota Tsusho will provide US$4.5 million to fund the completion of the feasibility study and other association pre-development activities expected to be completed in the third quarter of this year.  If a joint venture operating agreement is finalized, Toyota Tsusho will acquire a 25% equity interest.

The Japanese company will also be responsible for securing a Japanese government-guaranteed low-cost debt facility for at least 60% of the project's development cost. The facility is expected to be secured through the Japan Oils, Gas and Metals National Corporation (JOGMEC), a government entity that provides assistance to Japanese companies in obtaining mineral resources.

In a news release, Orocobre Managing Director Richard Seville said Toyota Tsusho "will also have the opportunity to negotiate a lithium chemical-off take agreement with Orocobre as part of the joint venture."

"Toyota Tshuso becoming our strategic partner allows Olaroz director access to Toyota Motor Corporation and its partner such as Panasonic and Sanyo," Seville said. "These companies have significant expertise and understanding of supply requirements in large format lithium-ion batteries or the automotive industry and consumer sector, and that will add greatly to our understanding of end-user requirements and demand."

Toyota Tsusho said, "The size and the quality of the deposit is world-class and we believe will produce high purity, battery grade materials required for the global battery industry, at a cost that is competitive with existing lithium brine producers in South America."

"Global demand for lithium across the electronics, industrial and automotive sectors continues to grow and we are very pleased to have secured access to a project of this size and quality, with a strong and focused development partner."

The project is believed to have 1.5 million tonnes of lithium carbonate and 4.4 million tonnes of potash. The company hopes to develop a 15kt lithium carbonate and 36kt potash annual production capacity beginning in 2012.

Project capex is estimated at $80 million to $100 million.

Mineweb is a web-based international mining publication focusing on mining financial and corporate news and comment.

Quick facts: Orocobre Limited

Price: 2.3 AUD

Market: ASX
Market Cap: $601.86 m

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