Australian lithium producer, Pilbara Minerals Limited (ASX: PLS) (Pilbara Minerals or the Company), is pleased to announce that it has executed a Shareholders Agreement with POSCO for the formation of an incorporated joint venture to develop and operate a 43ktpa lithium hydroxide monohydrate (LHM) Conversion Facility in South Korea.
The JV will be named 'POSCO-PILBARA MINERALS LITHIUM SOLUTION CO LTD', 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 Facility will consist of two production trains, each with a 21.5ktpa LHM production capacity, using (in part) POSCO's leading patented purification technology which has been developed by POSCO over the last 10 years which will be licensed on a nonexclusive basis to the JV.
Based on studies undertaken by POSCO the capital development costs for the Conversion Facility are currently estimated at a pre-feasibility study level to be between USD$600-6501 million dollars (100% basis). After allowing for initial working capital and pre-production financing costs, the total JV funding requirement is expected to be approximately
KEY POINTS
Incorporated joint venture (JV) in South Korea agreed between Pilbara Minerals and POSCO to jointly construct and operate a 43ktpa LHM primary lithium hydroxide chemical processing facility (Conversion Facility).
JV supports Pilbara Minerals' strategic objective of becoming a fully integrated lithium raw materials company and diversifies the Company's global customer base providing exposure to the rapidly growing South Korean lithium chemicals market.
Pilbara Minerals will initially hold an 18% interest in the JV, funded largely from the previously announced A$79.6M Convertible Bond Agreement with POSCO.
Call option granted to allow Pilbara Minerals to stage its investment to increase its JV interest to 30%, for a period up to 18 months after the successful ramp up of the Conversion Facility.
Amended Offtake Agreement to supply 315ktpa of spodumene concentrate to the Conversion Facility at market pricing for the lesser of 20 years and the life of the Pilgangoora Project.
JV to provide US$25M offtake pre-payment facility to Pilbara Minerals to fund general working capital and future expansions at the Pilgangoora Project.
Conversion Plant to play integral role in POSCO's supply chain and business strategy as it becomes a major battery materials supplier to global markets.
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 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$79.6M 5- year Convertible Bond Agreement being provided by POSCO. 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 315ktpa of chemical grade spodumene concentrate on commercial terms to the Conversion Facility. This will be sourced from Pilbara Minerals' existing installed production capacity at the Pilgangoora Project (inclusive of the recently restarted Ngungaju processing facility). Product sold under the offtake agreement will be at prevailing market prices for chemical grade spodumene concentrate sold on a CIF basis.
In recognition of the annual offtake quantity increasing from 240ktpa to 315ktpa for the expanded 43ktpa LHM Conversion Facility, the JV will provide Pilbara Minerals with a second ranking secured US$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 the Company's senior secured lenders under its senior secured syndicated finance facilities. The 315ktpa offtake agreement will not impact the Company's ability to continue to supply product under its existing offtake arrangements with other customers. 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 (and the world's) rapidly growing market for lithium-ion batteries for EVs, energy storage and other mobile power applications.
Pilbara Minerals' Managing Director and CEO, Ken Brinsden, said: 'We are delighted to have executed the Shareholders Agreement with POSCO to jointly own and develop a 43ktpa 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. 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 joint venture 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.'
Contact:
David Hann
Tel: +61 (0)8 6266 6266
FORWARD LOOKING STATEMENTS AND IMPORTANT INFORMATION
This announcement may contain some references to forecasts, estimates, assumptions and other forward-looking statements. Although the Company believes that its expectations, estimates and forecast outcomes are based on reasonable assumptions, it can give no assurance that they will be achieved. They may be affected by a variety of variables and changes in underlying assumptions that are subject to risk factors associated with the nature of the business, which could cause actual results to differ materially from those expressed herein. All references to dollars ($) and cents in this announcement are to Australian currency, unless otherwise stated. Information in this announcement regarding production capacity of the Pilgangoora Project are underpinned by the Company's existing Ore Reserves that have been prepared by a Competent Person in accordance with the JORC Code (2012 Edition) and were released by the Company to ASX on 6 October 2021 (Material Increase in Ore Reserve
ABOUT PILBARA MINERALS
Pilbara Minerals is the leading ASX-listed lithium company, owning 100% of the world's largest, independent hard-rock lithium operation. Located in Western Australia's resourcerich Pilbara region, the Pilgangoora Project comprising the Pilgan and Ngungaju processing plants produces a spodumene and tantalite concentrate. The significant scale and quality of the operation has attracted a consortium of high quality, global partners including Ganfeng Lithium, General Lithium, Great Wall Motor Company, POSCO, CATL and Yibin Tianyi. While it continues to deliver a low-cost, quality spodumene to market, Pilbara Minerals is pursuing a growth and diversification strategy to become a sustainable, low-cost lithium producer and fully integrated lithium raw materials and chemicals supplier in the years to come. Through execution of this strategy, Pilbara Minerals is positioned to become a major player in the rapidly growing lithium supply chain, underpinned by increasing demand for clean energy technologies such as electric vehicles and energy storage as the world pursues a sustainable energy future.
PILBARA MINERALS LIMITED 
