PERTH (miningweekly.com) – Lithium miner Pilbara Minerals has announced the satisfaction of all conditions precedent for the formation of a downstream joint venture (JV) with Korean major POSCO.

The formation of the JV and completion of Pilbara Minerals' initial 18% equity subscription in the JV company, with an option to go to 30%, had been conditional on satisfaction of certain conditions precedent.

These included the provision of a detailed construction and ramp-up budget for the construction and 18-month ramp-up of the conversion facility, as well as Pilbara Minerals filing necessary regulatory approvals with the Korea Trade Investment Promotion Agency for approval of its initial 18% investment in the JV company.

The JV will construct and operate a 43 000 t/y lithium hydroxide chemical processing facility in South Korea, with detailed engineering under way and major civil and construction work expected to start in the June quarter of this year, while commissioning is expected in late 2023.

The JV company will be funded from a combination of equity from both POSCO and Pilbara Minerals, as well as debt funding. Non-recourse external debt is expected to be secured by POSCO and the JV company from Korean commercial banks following the establishment of the JV.

Pilbara Minerals’ initial 18% equity participation in the JV will be largely funded from the A$79.6-million, five-year Convertible Bond being provided by POSCO. Funds will be drawn down under the Convertible Bond upon formation of the JV and completion of other closing conditions, which are expected to be satisfied in mid-April 2022.

Pilbara Minerals on Monday said that given final detailed engineering, design and procurement works are currently being completed, the company has prudently decided to apply a capital contingency of 15% to its share of the capital development costs included in the construction and ramp-up budget. This represents a total capital contingency for Pilbara Minerals' 18% share of $18-million.

In the event this contingency is ultimately required, then the company expects this amount to be funded from the 65% gearing ratio agreed with POSCO as part of the JV debt funding structure.

Based upon the construction and ramp-up budget received from POSCO, operating costs of the conversion facility are still expected to continue to be largely consistent with industry peers, following completion of its ramp-up.

“Pilbara Mineral’s longstanding relationship with POSCO continues to go from strength-to-strength, and we are pleased to partner with them to grow lithium chemicals production to support the massive demand growth that is building around the globe,” Pilbara Minerals MD and CEO Ken Brinsden said.

“With commissioning expected late 2023, this JV places both Pilbara Minerals and POSCO in a very strong position to participate as one of the few near-term lithium fine chemicals producers with underwritten raw materials supply that will emerge in the coming two years. It’s exciting for both the team at Pilbara and our shareholders to be able to extend our reach in the industry beyond spodumene and merchant markets.”