Chile’s Sociedad de Quimica y Minera SA (SQM)
and TSX-listed Lithium Americas Corp. entered into a 50:50
joint venture (JV) agreement to develop the Cauchari Olaroz
lithium project in northern Argentina at the end of March.
SQM paid $25m in exchange for a 50% stake in Minera Exar SA,
a wholly owned subsidiary of Lithium Americas – which
recently completed a rebranding process from Western Lithium
$15m of this will be used to pay off loans between Minera
Exar and Lithium Americas, while the remaining $10m will be
used to develop Cauchari Olaroz.
SQM’s backing of the Cauchari Olaroz project
marks the first explicit supporting of a junior by a senior
market player in the lithium business and SQM’s
first move into lithium production beyond the Chilean border.
Its stamp of approval will be welcomed by Lithium Americas, as
juniors jostle to prove the viability of their projects amid a
Patricio de Solminihac, SQM CEO, said that as Cauchari
Olaroz is is located "just a few hundred kilometres" from its
operation at the Salar de Atacama in Chile, adding that he
expects to have "similar production processes at both sites"
and "benefit from operating synergies".
Tom Hodgson, Lithium Americas CEO, meanwhile cited
SQM’s "decades of development and operating
experience", "strong team of technical and commercial talent"
and "track record of success as a partner in many global joint
ventures" as motivating factors in the agreement.
The companies will move to advance a work and engineering
plans, completing an updated definitive feasibility study (DFS)
based on an existing study completed by Minera Exar in
The DFS will evaluate the economic feasibility of a 40,000
tpa lithium carbonate equivalent (LCE) project.
Lithium Americas CEO Tom Hodgson said during the
company’s general meeting call that it has had
"very, very positive feedback on [its JV with SQM] from some
major players in the industry and major institutional
Hodgson also addressed the issue of selling a 50% stake in
what is seen as a valuable project for $25m.
"The answer is we believe the effect that this transaction
has on the value of our remaining 50% is enormous. It gets us
on to the path to production and gets us on to that path to
cash flow in a very, very low risk way," he said.
The original definitive feasibility study (DFS), which was
conducted in 2012, outlined that the company would bring the
project online in two tranches of 20,000 tonnes. The 2012 DFS
will be updated over the next few months with a view to
producing 40,000 tonnes with potential technological changes
reflecting process improvements SQM has made over the last few
The companies may decide to start with 20,000 tonnes
lithium. There is a 2:1 potash ratio and at full production the
JV would supply 80,000 tpa potash.
Lithium will be processed on site in Argentina, with part of
the project including the building of an industrial
Lithium Americas will benefit from SQM’s
marketing network but will have the ability to directly deal
with clients for specific products and applications if
Hodgson said that some have also questioned
SQM’s motives as part of the JV, with concerns
that the company will keep the project on ice to prevent
additional competition in the market.
"We are 100% certain that’s not the case. This
represents a very major growth opportunity for SQM as it does
for us," Hodgson said.
The next steps will be for Lithium Americas and SQM to agree
a detailed business plan and for both companies to arrange
There is a dispute resolution mechanism built into the
agreement should the companies struggle to reach consensus on
financing, although Hodgson said this is a worst case scenario
rather than an expected outcome.
Lithium Americas had been working with Korean battery maker
POSCO on the use of direction extraction technology at the
salar, a process which skips the evaporation stage associated
with the traditional methods for extracting lithium from
SQM’s expertise, however, is in the area
of traditional evaporation processing, which it has
accumulated over the past decades.
The new process is said to offer quicker extraction and
leave less of an environmental footprint. But while a number of
companies are testing it on a small scale, it is as yet untried
on a large scale brine operation, meaning its costs remain
It remains unclear which process the partners will opt for