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Ganfeng buys control of Caucharí-Olaroz

China’s Ganfeng Lithium is to buy a controlling position in Minera Exar, its joint venture with Lithium Americas, which is building the Caucharí-Olaroz lithium project in Jujuy, Argentina.
Ganfeng buys control of Caucharí-Olaroz Ganfeng buys control of Caucharí-Olaroz Ganfeng buys control of Caucharí-Olaroz Ganfeng buys control of Caucharí-Olaroz Ganfeng buys control of Caucharí-Olaroz

Pond construction at Caucharí-Olaroz in Jujuy, Argentina

Ganfeng agreed to subscribe for new shares of Exar for US$16 million in cash to increase its interest from 50% to 51%, with Lithium Americas diluting from 50% to 49%.

Both parties have agreed to the 2020 funding schedule, including investment of up to $400 million, in accordance with the 2019 approved construction plan. The $565 million Caucharí-Olaroz development remains on budget and is scheduled to commence production in early 2021.

"The transaction with Ganfeng Lithium further strengthens our balance sheet while ensuring Caucharí-Olaroz construction continues to advance as planned. For Lithium Americas, the transaction reinforces our strategy of building a low-cost lithium operation in Argentina, and provides funding to advance our second flagship project, Thacker Pass, towards construction in Nevada," said president and CEO Jon Evans.

To reflect the change in ownership of Exar, Lithium Americas and Ganfeng agreed to restructure Exar Capital, a jointly-controlled entity which provides funding to Caucharí-Olaroz. As such, Ganfeng agreed to provide $40 million to Exar Capital in non-interest-bearing loans, repayable in 2029, with the proceeds to be used to repay intercompany loans owing to Lithium Americas, with $20 million to be paid upon closing the transaction and an additional $20 million in August.

Minera Exar will remain the operator of Caucharí-Olaroz and Lithium Americas will enter into a management services contract with Ganfeng to provide the continued services of the company's senior management, including Gabriel Rubacha as CEO and Franco Mignacco as president of Minera Exar.

Exar is building a 40,000 tonnes per year battery-quality lithium carbonate operation at Caucharí-Olaroz. Construction is about 31% complete with construction scheduled to be substantially mechanically complete by the end of 2020 and on track to commence production in early 2021. As of December 2019, $280 million (50%) of the planned capital expenditure has been committed of which $181 million (32%) has been spent.

Work to date includes 87% of the total planned earthworks for the 12sq.km evaporation pond layout and 33% of pond liner has been installed. The concrete foundation for the boron solvent extraction plant is about 33% advanced.

There are 15 production wells completed and 11 in progress. About 4.3 million cubic metres of brine has been pumped into the ponds for initial evaporation and process testing.   

The majority of the critical, long-lead-time equipment for the lithium carbonate plant is under fabrication. Lime plant equipment has been received at site and construction has started. The first SX plant equipment is scheduled to arrive at site in February followed by the crystalliser equipment.

Shares in Lithium Americas are trading at C$5.71, valuing the company at $513 million.