PERTH (miningweekly.com) – Lithium producer Pilbara Minerals on Thursday revealed the details of a proposed funding package providing the balance of the funding required to expand its Pilgangoora operation from two-million tonnes a year to five-million tonnes a year.

The funding package is underpinned by two of Pilbara’s key customers; Jiangxi Ganfeng Lithium and Great Wall Motor Company.

The funding package will consist of a $25-million offtake pre-payment facility from Great Wall, satisfying its Stage 2 funding commitment, as well as a A$50-million equity placement to Jiangxi, satisfying its Stage 2 funding commitment.

Furthermore, a proposed new $50-million Nordic bond will also be issued under the same terms and conditions of an existing Nordic bond, and which will be implemented with bondholder consent in the current quarter.

“We are out of the blocks early in the New Year with the announcement of a funding package which once completed should ensure that our next major step, to five-million tonnes a year, is fully-funded,” said Pilbara MD and CEO Ken Brinsden.

“Upon completion of the expansion by the March quarter of 2020, Pilgangoora will be elevated to an annualised production rate of up to 850 000 t/y of spodumene concentrate, putting us firmly on track to become one of the world’s major global lithium raw material producers.”

The financing provided both Great Wall and Ganfeng to secure their full Stage 2 offtake, envisaged in their original offtake agreements, allowing each company a total of 150 000 t/y from the Stage 2 production.

Meanwhile, Pilbara said on Thursday that included in its subscription agreement with Ganfeng, the company has also agreed to provide its offtake partner a further 50 000 t/y of spodumene concentrate from any Stage 3 expansion, in exchange for a product prepayment facility of no less than $20-million.

Brinsden said that with interest from the offtake partners to see the Pilgangoora project grow beyond the Stage 2 expansion, the company would now undertake studies to evaluate the potential Stage 3 expansion to at least 6.2-million tonnes a year, and potentially to up to 7.5-million tonnes a year, as part of the engineering work currently contributing to the Stage 2 project.

The Stage 3 expansion will ultimately deliver up to one-million tonnes a year of spodumene concentrate.

“This should send a clear message about the robust outlook for the lithium market as far as our Tier 1 customer base is concerned, and demonstrates the secure position the world-class Pilgangoora project commands as part of a global lithium-ion supply chain that is growing rapidly,” Brinsden said.

Pilbara noted that the decision and timing for the delivery of the Stage 3 expansion would be subject to a range of factors, including final customer demand, financing, environmental approvals and further technical and economic analysis.

The Stage 3 expansion was not planned of any time before early 2021.

Meanwhile, Pilbara on Thursday said that has now also initiated discussions with direct shipping ore (DSO) customers Atlas Iron and end customer Sinosteel to determine whether or not to continue with DSO operations.

Brinsden noted that the DSO programme was instigated during the early stages of the Stage 1 construction to provide an early cash flow, but given the success of the Stage 1 operation, the company was now assessing the relative benefits of maintaining a separate DSO operation.

Pending the outcome of these discussions, the DSO operation has been suspended.

In addition, Pilbara has also entered into a non-binding memorandum of understanding (MoU) with Korea’s Posco to evaluate an increase to the proposed jointly-owned South Korean chemical conversion facility, from 30 000 t/y lithium carbonate equivalent (LCE), to 40 000 t/y LCE.

As part of the agreement under consideration, the existing offtake agreement for spodumene concentrate from the Pilgangoora project would increase from 240 000 t/y to 315 000 t/y over the life of the mine, to support the increased plant capacity.

The additional offtake to the expanded joint venture (JV) chemical facility will be supported by the Stage 3 expansion to the Pilgangoora operation, Brinsden said.

“In much the same way as Pilbara developed Stage 1 with Stage 2 in mind, Stage 2 will be developed with a Stage 3 expansion clearly in the frame. In that way, we can maximise the synergies between each development, grow in line with our customer’s expectations, and reduce the combined cost of future developments.”

Pilbara’s right to participate as a 30% JV partner in the chemical plant is required to be exercised before the end of February, with final documentation and board approvals to be completed by May.

The miner said on Thursday that due diligence activities to assess the proposed JV is currently under way.