Ann: Cauchari Drilling Update, page-3

I figured I should probably take this discussion to a Cauchari thread...

So as noted on the other thread, the stage 2 debt facility has now been agreed at 180m USD - up from the previously indicated 100m USD. Documentation is to be finalised but that sounds like a formality now
That leaves them well cashed up...

	Stage 2 Project Cost	295 m USD
	Debt facility	180 m USD
	Equity required	115 m USD
	ORE share of equity	86 m USD
	ORE already contributed	21 m USD
	ORE balance to contribute	65 m USD
	ORE Dec 31 cash	284 m USD
	Remaining cash	219 m USD

Naraha was going to need around 6m USD from ORE
That leaves a lot of cash available for Cauchari or Stage3. 
AAL website indicates the Cauchari feasibility study being delivered in the next quarter for a 401m USD, 20ktpa lithium carbonate project. Subject to permits, funding, and off take arrangements, it could be under construction before the first carbonate is coming off the Stage 2 line....

Looking a bit deeper, the AAL corporate presentation, provides their timeline as below


The phase 3 drilling completion announcement came through in early January pretty much as shown on this schedule. AAL indicate
Resource upgrade close to completion for release Feb/March 2019
The ORE presentation gives that with a little wriggle room... 
Phase 3 resource definition drilling and test pumping program is complete at the Cauchari project site which aims to upgrade the resource classification by Q2 2019 to support the project’s Feasibility Study
So where are they up to with permitting?
AAL's presentation p21 indicates the following as achieved (past tense) in phase3/2019
• Submitted EIA for project development initial approvals
• Undertook extensive community consultation as part of preparing the project EIA
• Successfully defined industrial water supply for the project
They have had Silvia Rodriguez (ORE/SDJ's Corporate manager of shared value) managing the Community Relations program.
JEMSE will no doubt be brought in to the final JV structure, but the basis for how to do this now has good precedent.  
I suspect the process is well advanced -  ORE blazed the trail and AAL's path should be much easier.

Funding and off-take is the interesting part. Have a listen to this interview from September last year - the interesting part about funding/off-takes/Goldman Sachs begins at around 6:00. Interview
Anticipating off-take discussions underway by year end (last year)....
Speculation about consolidation within the basin, etc, etc...
Data room open in October last year - Tianqi, Ganfeng, CATL, etc, etc... Expecting an off-take deal following DFS
There is a bit of a Chinese flavour coming through and it is quite do-able with the asset having been kept at arms length from TTC.
All very interesting. Not so much talk now about supply of brine to ORE, however, harking back to the original 24 Nov 2016 announcement
Orocobre will have a right of first refusal over any direct or indirect sale by Advantage Lithium of allor any portion of the Cauchari properties, and Orocobre will be entitled to re-acquire the Cauchari properties pursuant to an agreed valuation process in the event of a change of control of Advantage Lithium.
and
Orocobre will retain a 1% gross royalty on production from the Cauchari properties, and will have rights of first refusal on future brine production.
So ORE remains in a nice position in all of this speculation over deals. 

So if DFS is due in Q2, is the construction program doable? Looking at their timeline, it feels a bit too aggressive. I doubt that they could expect to get construction underway hard on the heels of the DFS - insert a minimum of a six month gap to resolve funding/offtake/permits. Construction starting end of this year?
Eighteen months to construct (inclusive of infrastructure) may be possible but their expectation for filling ponds and concentrating brine feels a bit optimistic. I doubt they could achieve first product before 2022, but I expect the excitement will begin around the middle of this year.