Alliance Mineral joined hands with China-based Jiangxi Special Electric Motor Co to produce and sell the battery-grade lithium hydroxide under a 50:50 joint venture. The news has sent the stock price to surge up by 6.25% in an early-trade to stand at $0.170 on 29 April 2019 (12:37 PM AEST).
In an announcement to the Australian Securities Exchange, Alliance Mineral Assets Limited (ASX: A40
) announced that it has entered into a non-binding memorandum of understanding (MOU) with Jiangxi Special Electric Motor Co., Ltd to develop the terms on which the parties will cooperate a Hydroxide Joint Venture.
The collaboration would enable Alliance to participate in the downstream lithium products market without having to incur the capital costs or risk associated with the construction of a conversion facility. It is because the joint venture provides access to Jiangte’s nearly-completed lithium hydroxide circuit with an existing conversion facility in Yichun, Jiangxi Province, China.
Alliance Managing Director, Mr Mark Calderwood stated that “The Hydroxide JV provides for a rapid, low-risk, low-cost entry into downstream production and sales of battery-grade lithium products. The company sees market demand for lithium hydroxide increasing. Aside from traditional industrial uses, a number of rechargeable battery manufacturers are now using lithium hydroxide in their products and this Joint Venture will enable Alliance to participate in this market.”
Both the parties have agreed to share equally in the margin from the sales of lithium hydroxide after recovering respective costs. Alliance believes that the profit margin per tonne of spodumene concentrate would improve significantly when processed under the Joint Venture compared to selling raw spodumene concentrate.
Mr Calderwood added, “This downstream Joint Venture opportunity will enable Alliance to further benefit from its high-quality Bald Hill lithium product which provides for high-recovery and reduced conversion costs at one of the world’s largest and modern processing facilities with lower levels of emissions.”
Under this 50:50 Joint Venture, Alliance will supply the spodumene to the Joint Venture with the cost of production and transport recovered from sales of lithium hydroxide. Spodumene contributed by Alliance will then be processed at the Jiangte’s Converter to produce lithium hydroxide which will be sold by the Joint Venture to third-parties.
The report read that concentrate requirement of the Joint Venture for 2019 and 2020 are expected to represent only 20% of Bald Hill production. However, once fully operational, the Converter will process approximately 100,000t of spodumene per annum, capable of producing up to 15,000tpa of lithium hydroxide.
Alliance and Jiangte intend to continue talks with potential long-term downstream customers which may provide additional longer-term certainty around demand and pricing. The parties are expected to close a formal binding agreement in relation to the Joint Venture by 30 June 2019.
Jiangte has been producing battery-grade lithium and other by-products since 2010 and owns two conversion facilities in China including one of the largest lithium mineral conversion facilities in the world, Yinli New Energy facility (30-hectare). Jiangte has developed a high-efficiency, low-cost technology of lithium extraction from lepidolite and spodumene, and was the first enterprise to enter into large-scale production of lithium carbonate extracted from lepidolite in China.
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