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Pilbara Minerals secures funding for Stage 2 expansion of Pilgangoora lithium project

Hong Kong — Pilbara Minerals said Thursday it has worked out a funding package for an A$231 million ($160.36 million) Stage 2 expansion program of its wholly-owned Pilgangoora lithium-tantalum project in Western Australia, with mining and processing capacity expected to see a 150% boost from 2 million mt/yr in the Stage 1 operation to 5 million mt/yr.

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"Upon completion of the expansion by the March quarter of 2020, Pilgangoora will be elevated to an annualized production rate of up to 850,000 mt per annum of spodumene concentrate, putting us firmly on track to become one of the world's major global lithium raw material producers," Pilbara Minerals's managing director and chief executive officer Ken Brinsden said in a company statement.

Two of Pilbara Minerals's key customers, China's Great Wall Motor Company and Jiangxi Ganfeng Lithium Company, will provide about 37% of the capital investment in the Stage 2 expansion project.

Great Wall has agreed to provide Pilbara Minerals $25 million offtake pre-payment facility in return for an additional 75,000 mt/year of spodumene concentrate output from Pilgangoora's Stage 2.

In October 2017, Pilbara Minerals had already committed to supply the Chinese automaker 75,000 mt/yr of spodumene concentrate from the Stage 2 production for an initial five-year term, with options for extension up to 10 years. Great Wall, on the other hand, had subscribed about 3.47% of Pilbara's issued shares in an A$28 million equity placement.

The latest pre-payment facility will allow Great Wall to lift up to a total 150,000 mt/yr of spodumene concentrate production from Stage 2 of Pilgangoora.

Meanwhile, Pilbara Minerals and Ganfeng have agreed to execute a subscription agreement for an A$50 million equity placement to enable the latter to secure an additional 75,000 mt/pa of Stage 2 offtake.

In the subscription agreement executed with Ganfeng, Pilbara Minerals has also agreed to provide a further 50,000 mt/yr of spodumene concentrate to Ganfeng from any Stage 3 expansion, in exchange for a product prepayment facility of not less than $20 million.

Ganfeng had already signed a 10-year offtake contract with Pilbara Minerals in mid-2017 for the supply of 160,000 mt/yr of spodumene concentrate from Pilgangoora Stage 1 production, with options for extension up to another 10 years.

Other than financial commitments from its Chinese partners for the Stage 2 expansion program, Pilbara Minerals also plans to issue a new $50-million Nordic bond under the same terms and conditions of an existing Nordic bond, which will be implemented with bondholder consent in the current quarter.

Separately, Pilbara Minerals announced Thursday that it has entered into a non-binding memorandum of understanding with POSCO to evaluate capacity increase to their proposed, jointly owned chemical conversion facility in South Korea, from 30,000 mt/yr lithium carbonate equivalent, to 40 000 mt/yr LCE.

"This MoU with POSCO commensurately recognizes an increase in the existing spodumene concentrate offtake agreement from Pilgangoora project from 240,000 mt/yr to 315,000 mt/yr to support the larger chemical facility," Pilbara Minerals said.

In response to the strong demand for Pilgangoora's production, the miner has commenced evaluating expansion opportunities for a potential Stage 3 project with ultimate ore processing capacity of 7.5 million mt/yr and spodumene concentrate production capacity of 1.2 million mt/yr.

--Winnie Lee, newsdesk@spglobal.com

--Edited by Ikhhlaq Singh Aujla, newsdesk@spglobal.com