Jul 1 2013
Orocobre Limited ("Orocobre" or "the Company") wishes to advise of a significant advance at its 100% subsidiary Borax Argentina with the decision to relocate the borax chemical plant from its current location in Campo Quijano (close to the city of Salta) to the Tincalayu mine site.
The Borax Argentina chemical plant produces borax decahydrate, borax pentahydrate and anhydrous borax.
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The relocation of the borax plant to the Tincalyu mine site will have significant benefits through both the reduction of operating unit costs and also increasing overall mineral recovery from the mine. Currently, run-of-mine ore at 17% B2O3 is concentrated at Tincalayu using dry magnetic separation to produce a 21% grade which is then transported the 350 kms from Tincalayu to Campo Quijano for production of borax chemicals. Recovery through the dry magnetic separation plant is only approximately 60%. In the future, when the borax plant is at the Tincalayu mine site, the borax plant will treat run-of-mine ore without the use of the magnetic separation plant. This will result in:
- no loss of mineral content prior to the borax plant as there will be no concentration stage
- removal of the operating costs of the dry magnetic separation concentration stage
- improvement in the freight cost profile by cartage of finished products with grades between 37% and 49% B2O3 as opposed to a 21% grade concentrate.
The total capital budget for the project is AR$30m (US$5.6m) which is being funded within Argentina as explained below.
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FINANCE
The total capital budget of the relocation and plant modifications is AR$30m (US$5.6m*). Of this, the company has received project finance from HSBC for AR$18m (US$3.4m*). Borax Argentina will provide AR$12m (US$2.2m*) in the form of its existing equipment, materials and labour currently employed in the Borax operations. The loan will be repayable over 4 years and has an interest rate of 15.25% p.a.
The interest rate applicable to the loan is less than current market rates in Argentina due to a government directive as documented in the Central Bank publication "Banco Central de la Republica Argentina Communication "A" 5380" dated 21/12/2012, which established a scheme to ensure funds are available to be loaned to local businesses for expansion and improvement projects at reduced interest rates.
It is worthwhile to note that all customer sales contracts for the Borax Argentina business are denominated in US$ and that the AR$ has been devaluing against the US$. Over 2012, the devaluation was 14.1% and over the first six months of 2012, devaluation has been 9.5% (19% pa).
The completion date for the project is forecast to be before the end of June 2014. Preparations have already commenced with some preliminary site work being done at the Tincalayu mine and the planning and commencement of an inventory build to allow for stock cover at critical points in the relocation program.
The Company considers this project an exciting development which will position the Borax Argentina business well for the future.
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(* at current exchange rates)
Managing Director, Richard Seville, said. "We are very pleased with this project. This initiative has been driven by the management team of Borax Argentina and they deserve credit for making this "step change" so quickly after Orocobre purchased the company. The move will have significant benefits to the operation in terms of unit costs and mineral recovery. We see this as the first of a number of initiatives for the coming years."