PROJECT UPDATE: POSCO Deal Positive for Lithium AmericasWhen one of the world’s largest steel and advanced minerals companies decides to set up shop next door, it can only mean good things.

Shares of lithium development company Lithium Americas (TSX:LAC) were up 20 percent on Friday after the company announced that it has teamed up with POSCO, Korea’s largest steel company and a leading developer of advanced materials processes. According to the January 17 press release, POSCO will be situating its next-generation lithium extraction pilot plant at the Lithium Americas Cauchari-Olaroz project in Jujuy, Argentina. The company expects the plant to be operational by Q4 2014.

For years, POSCO has been developing a new, innovative lithium extraction technology that can compete with traditional brine evaporation technologies. POSCO’s technology is faster than current evaporation methods and can also minimize the associated environmental footprint of large-scale evaporation ponds.

Franco Mignacco, the company’s vice chairman and president of its Argentinean subsidiary, Minera Exar, is encouraged that POSCO has selected its Cauchari-Olaroz project as the location for its large-scale pilot plant.

“We look forward to working with POSCO and their lithium team to pursue the application of this advanced lithium extraction technology that significantly shortens the commercial production timeline for lithium and potassium compared to traditional evaporation technology,” Mignacco said.

Per Lithium Americas’ press release, POSCO will be responsible for developing the technology, as well as managing and operating the pilot plant. For its part, Lithium Americas will provide local support and the resources for the brine. According to the release, “the Agreement is limited to pilot plant operations, but provides for an exclusivity period in the future to negotiate terms of a commercial stage operation. Costs of building, delivering and operating the pilot plant will be borne by POSCO, which also retains 100% ownership of the pilot plant.”

On Monday, Lithium Americas announced that it will be filing a preliminary short-form prospectus within each province of Canada in respect to a rights offering aimed at raising roughly $18.5 million. Net proceeds of the offering will be used to repay all of the company’s outstanding debt (currently approximately $9.5 million) and for general working capital purposes, including the continued funding of its flagship Cauchari-Olaroz project.

Lithium Americas is developing one of the world’s largest and lowest-cost lithium operations in Argentina. It has defined one of the top three largest lithium brine resources in the world, and has completed a definitive feasibility study for the project.

 

Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.