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Orocobre Details the Significance of Its Partnership with Advantage Lithium (TSX-V: AAL)

February 22, 2017

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is General Counsel and Joint Company Secretary for Orocobre Limited, Mr. Rick Anthon. Mr. Anthon is a practicing lawyer with over 30 years experience in both corporate and commercial law. He's also had extensive experience in the resource sector as a director of a number of resource companies, and as legal advisor, including project acquisition and development, capital raising, and of course, corporate governance.

Orocobre is one of Argentina's leading lithium producers with current production from the Olaroz Brine Project in Argentina. The company benefits from a dominant land package in Argentina's lithium triangle, and has very strong connections with government and local communities. In November of 2016, Orocobre announced they had entered into a letter of intent with Advantage Lithium (TSX-V: AAL)(OTC: AVLIF) that would allow Advantage Lithium to acquire up to 75% of Orocobre's Cauchari project, and 100% interest in five other projects. We'll get into the deal in Cauchari in a bit, but first, I want to thank you so much for joining me today, Rick.

Rick Anthon: Yes. My pleasure, Gerardo.

Gerardo Del Real: Well, before we get into the JV deal with Advantage Lithium, could you please share a bit more of your background? I try to provide a brief introduction there, but could you share a bit more of your background and how you got involved with Orocobre?

Rick Anthon: Certainly, Gerardo. My background, as you noted in your introduction, I'm a 30 year veteran of the resource industry, principally as a lawyer and advisor, but also as an active participant in terms of establishing companies and being involved at the board level with numerous companies.

My engagement with Orocobre goes back to my firm was involved in the initial public listing of Orocobre, which started in 2006, and was actually effected on the ASX in 2007. I've been involved with the company ever since, and it's one of those rare things, being a company that started as a small junior company, which has now grown to be plus or minus a billion-dollar market cap in Australia and an ASX 200 listed company. About three years ago, the people who run the company, principally Richard Seville, who I've known for 20 plus years, suggested that I should come and take a full-time role. It was an opportunity too good to refuse, because it's a very exciting place to be at the moment.

Gerardo Del Real: Absolutely, absolutely. I understand that the current government has a much more optimistic view, as far as mining goes, and natural resources, in general, so I can imagine that it's an exciting time to be in Argentina. Now, I mentioned in the intro that Orocobre is one of Argentina's leading lithium producers. Can you provide some context as to the infrastructure advantages, and the land package that Orocobre has assembled, because you were in early, staking some of the best ground, and you're in production in a sector that's expected to see demand increase exponentially.

Rick Anthon: Yeah, indeed. As I said, the history of Orocobre's involvement with Argentina goes back to 2006. In fact, the key tenure on which we currently operate at Olaroz was first secured in 2005, so that long history has enabled us to build a dominant land position at Olaroz, which we consider to be probably the best brine deposit in Argentina, and one of the best in the world. It has been actively explored since 2008, and the processing plant and the related infrastructure has been developed since 2011, and having come fully online late last year, early this year, so we have an extensive ... Obviously, through that period, we've built up extensive relationships with the provincial governments, and in some ways most importantly, with the local communities, who we've worked with closely over that period of time.

Gerardo Del Real: Excellent. Now, let's talk about the deal with Advantage Lithium. You mentioned the contacts and relationships that you've built up over time, and I know that behind the scenes, every serious junior in the lithium space approached Orocobre about the Cauchari property and the land package that Advantage and Orocobre decided to joint venture. Now, the commitment is a significant one. Orocobre will own 31% of Advantage Lithium with a share lockup, which I love. Advantage can earn into 75% of Cauchari, and we'll talk about Cauchari in a bit. In addition, Advantage will also have 100% interest in five other projects, as I mentioned earlier, so let's take it in order. What was it about Advantage Lithium that led Orocobre to partner with them?

Rick Anthon: Well, Gerardo, I think, just taking a slight step back there, what we were looking for is we knew that, outside of Olaroz, we had this extensive land package. We are disciplined and focused in what we're trying to do at Olaroz. The downside of that was that projects of merit, such as Cauchari and the other exploration projects we had, simply were not, in this market, getting the attention that they deserved, so what we needed, from Orocobre's point of view, was a mechanism whereby we could develop, or have a hand in developing, those projects.

That led us to look at, I think, the optimum structure, which we thought was finding a company which we could work with, and then structuring an appropriate deal. The key things we were looking for was obviously the right structure in that company, and it was also absolutely essential that that company came with the right people, and the right management, and basically people that we knew we could work with. You referred to the fact that we've got a lockup. This isn't a quick turn of our assets. This is a commitment by us, to work over an extensive period of time, to actually add significant value to those assets, so Advantage, with David Sidoo and his management team, fitted that bill.

Gerardo Del Real: Excellent, excellent. Now, you mentioned Cauchari, which is the flagship for Advantage, and a project that is host to a significant lithium-potash resource, but it's also just 20 kilometers from Orocobre's production plant. There is the potentially, obviously, there for an offtake agreement in the future. Can you give us some perspective on the exploration upside that Cauchari presents, and the five other projects that were included in the deal, that you mentioned were also very prospective?

Rick Anthon: Yeah. Look, start with Cauchari, because that is the crown jewel, as far as this Advantage exercise is concerned. It's currently got just under a half million lithium LCD-equivalent resource. Of more interest, it's got up to five million tonne exploration target. We're going to be starting drilling there within the next one to two months. We're fully permitted now, and we're just in the process of working out the harder details of the drill program.

It's highly prospective. It's in a basin that we already understand. Obviously, we know there's brine there. It's in a basin where both Olaroz, SQM and Lithium Americas are spending considerable amount of money developing, so it's very exciting from that point of view. It's probably, of all the exploration efforts that are kicking around in Northern Argentina, it's one where we feel we can get, we're very hopeful of getting very positive results, and if we get those positive results because of its close proximity to the Olaroz facility, and because the fact that we understand how to do business in Argentina, it's one which we think we can take from a prospect to a developed asset within a relatively short period of time.

The other areas are of interest. Some of them are quite early stage, but Guayatoyoc, which is to the north of Salinas Grandes, is one we'll be having some focus on. Also of great interest to us is the Antofalla project, where our neighbors up there are Albemarle. Albemarle bought their position there from a local consortium, and Albemarle have already stated that they believe that there is a significant project waiting to be developed at Antofalla, so we like the sound of that.

Gerardo Del Real: Absolutely.

Rick Anthon: Again, not a lot of work done, but the early stage work that has been done there is very interesting. The other projects are early stage, but they are ones which we have had within the portfolio for some time. In the past, we have had a lot more tenure in the portfolio, but we've culled it to get down to the four or five projects which we think are of merit.

Gerardo Del Real: Excellent. Now, you mentioned the long-term commitment by Orocobre. This is obviously not a stock flip. The post-transaction lockup guarantees that, and speaking to that, Advantage recently closed the previously announced US$20 million dollar financing, and so obviously, drilling is now expected to commence as early as next month. I'm going to ask you a two part question, Rick. The first part would be how do you see Orocobre and Advantage being able to capitalize on that first mover advantage that the companies now share, and the second part would be what do you see, looking ahead in the lithium space?

Rick Anthon: Well, the first part of the question I think I've probably already touched on. We're there. We have extensive infrastructure. We have power. We have water, and we have people. All of which goes without saying are essential to develop a project, but people continually underestimate how difficult these projects can be to develop. There's a reason that Orocobre is the only new lithium brine project in the last 20 years. Albemarle hasn't built a new one. They're just expanding existing ones. SQM hasn't built a new one. Orocobre's the only company that's gone out and done that.

We have hard-earned and hard-edged experience from operating in Argentina, and Advantage will get the advantage of that experience. They'll get the advantage of our contacts, and they'll get the advantage, as and when necessarily, of the expertise that we've got within the group, and that leads us to think that there is a situation where we can fast track a project of merit. If that answers your question, Gerardo, I think that's how we see the first part of your question.

Gerardo Del Real: Absolutely. Absolutely, and the second part, just taking a more macro perspective, what do you see, looking ahead, in the lithium space? You mentioned the fact that there hasn't been much in the way, or anything in the way of newer projects. There's been expansion of current projects, but what do you see, looking ahead, as far as supply, demand, and obviously the path forward for both Orocobre and for Advantage as a partner?

Rick Anthon: Well, I think we've probably got a slightly broader perspective in Australia, because obviously, we have the push from the hard rock producers in Western Australia, who are now starting to rapidly come online. Their product is principally headed for China, and I think will be for the next five or six years, so we don't actually see there being any issues of oversupply for probably five plus years, as the horizon that we take, we see markets, we see the prices staying strong. We see the fundamental demand, which as everybody understands in this industry, is driven by the increase in the electric vehicle usage. In our view, that's only heading in one direction. I think the suppliers will be struggling to keep up, and that's going to translate to strong pricing over the next five years.

Gerardo Del Real: Excellent, excellent. Rick, I want to thank you so much for your time. Is there anything else that you'd like to add, that maybe I missed?

Rick Anthon: No, other than to say we've worked closely with David and his team over the last six months. We're now financing and looking forward to closing the transaction within the next month, and we're very much looking forward to actually getting Advantage down to business.

Gerardo Del Real: Well again, speaking to that end, I've heard nothing but positive things about how supportive Orocobre has been to Advantage during the road show, and obviously during the financing time, so I'm looking forward to hopefully having you back on the show to talk about Cauchari, and as the other projects develop, as well. Again, I can't thank you enough for your time, Rick.

Rick Anthon: Yeah, my pleasure. 

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