Pilbara Minerals and POSCO finalise JV for lithium hydroxide production for early 2024

Pilbara Minerals (ASX: PLS) has satisfied key conditions precedent for the formation of a joint venture (JV) with Korean steel-making company, POSCO.

POSCO is the world’s largest steel manufacturing company by market cap and actively pursuing investments throughout the lithium value chain.

The JV will construct and operate a 43,000 tonnes per annum (tpa) lithium hydroxide chemical processing facility in Gwanyang, South Korea.

Diversifying into downstream

In the context of lithium production, upstream activities include the production of raw materials (e.g. lithium brine and spodumene). While downstream activities involve processing lithium compounds into lithium carbonate, hydroxide or chloride. 

Pilbara Minerals will hold an initial 18% equity stake in the JV company, with an option to scale up to 30%. 

It is estimated that capital development costs for the conversion facility will be around US$750m to US$800m.

The project will be funded from a combination of equity from POSCO and Pilbara Minerals, as well as debt funding. Pilbara Minerals said it will fund its part of the project from a $79.5m convertible bond being provided by POSCO. 

Hydroxide timeline

Final detailed engineering, design and procurement works are currently being completed. Major construction works are expected to commence in the June quarter, 2022.

Construction of the first train of the conversion facility is expected to be completed by mid- 2023, with the second train completed approximately 3 months later. 

Source: Pilbara Minerals

“With commissioning expected late 2023, this joint venture places both Pilbara Minerals and POSCO in a very strong position to participate as one of the few near-term lithium fine chemicals producers with underwritten raw materials supply that will emerge in the coming two years,” said Managing Director and CEO Ken Brinsden.

Pricing perspective

Lithium hydroxide is the superior compound compared to lithium carbonate. It decomposes at a lower temperature, allowing the production of longer lasting batteries.

Source: Macquarie Research, March 2022

Interestingly, Chinese lithium carbonate prices have rallied ahead of hydroxide prices for the past few months.

How it all comes together

Participation in the JV supports Pilbara Minerals’ long-term strategy of becoming a fully integrated raw materials company.

Pilbara Minerals intends on being an offtake partner for the lithium processing facility, supplying up to 315,000 tpa of spodumene concentrate.

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