Lithium producer Orocobre (ASX:ORE,TSX:ORL) and joint venture partner Toyota Tsusho (TSE:8015) have approved a US$295-million stage 2 expansion of the Salar de Olaroz lithium brine project in Argentina.

The expansion will increase lithium carbonate production capacity by approximately 25,000 tonnes per year, bringing total Olaroz output capacity to approximately 42,500 tonnes per year.

“This commitment to Stage 2 at Olaroz will cement Orocobre’s position as a global lithium producer operating at the bottom quartile of the lithium cost curve,” Orocobre Managing Director Richard Seville and incoming CEO Martin Perez de Solay said in a press release.

“The very strong relationship with Toyota Tsusho continues to be mutually beneficial and will support the ongoing development and further expansion of the world class Olaroz lithium asset.”

Stage 2 is set to produce 17,500 tonnes per year of battery grade lithium carbonate and 15,500 tonnes per year of technical grade lithium carbonate. It will also produce 9,500 tonnes per year of technical grade lithium carbonate to be used as feedstock for the proposed lithium hydroxide plant to be built in Japan.

Negotiations on the engineering, procurement and construction contract for the Naraha plant are advancing rapidly between Toyota Tsusho as operator and Veolia as contractor, Orocobre said.

The revised total capital expenditure for Stage 2 is expected to be US$295 million, US$10 million more than originally anticipated, including US$25 million contingency. The expansion funding will come from a combination of project debt, operating cash flows and shareholders loans.

“We don’t see this as a surprise, although Capex was up slightly, and expansion approval did take a little longer than we anticipated,” analysts at Eight Capital said in a note to clients.

“Orocobre is a leader with few peers. It is the only junior lithium company to bring a brine project into production,” they added.

In its quarterly report released in October, Orocobre said production at Olaroz reached a total of 2,293 tonnes of lithium carbonate — a 36 percent decline quarter-on-quarter due to a shutdown of the plant for two weeks and seasonally lower evaporation rates. Meanwhile, total sales revenues increased 36 percent compared to the same quarter last year to US$32 million.

Commissioning of Stage 2 at Olaroz and the Naraha lithium hydroxide plant are expected to be completed during the second half of 2020.

Olaroz hosts measured and indicated resources of 6.4 Mt of lithium carbonate equivalent and is capable of sustaining current continuous production for 40-plus years with only 15 percent of the defined resource extracted, according to the company.

Aside from Olaroz, Orocobre operates Borax Argentina, a boron minerals and refined chemicals producer, and has a 33.5-percent interest in Advantage Lithium (TSXV:AAL).

On Thursday (November 29), shares of Orocobre were up 5.61 percent in Sydney, trading at AU$4.33.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Advantage Lithium is a client of the Investing News Network. This article is not paid-for content.