The Orocobre Limited (ASX: ORE) share price has had a mixed day of trade on Friday.
After pushing over 2.5% higher this morning, the lithium miner's shares are currently flat in early afternoon trade despite the release of a positive announcement.
What was announced?
This morning Orocobre announced that the Final Investment Decision for the Naraha Lithium Hydroxide Plant in Japan has been approved by the boards of Orocobre, Toyota Tsusho Corporation, and its joint venture.
Orocobre will hold a 75% economic interest in the project with the operations to be managed by Toyota Tsusho Corporation.
Furthermore, management advised that negotiations on the engineering, procurement, and construction (EPC) contract between Toyota Tsusho Corporation and its EPC contractor Veolia have now been finalised.
This means that construction of the Naraha Lithium Hydroxide Plant is expected to commence during the first half of calendar year 2019, with commissioning to commence around two years later.
Capital costs are expected to be approximately US$77.6 million excluding VAT, but the joint venture will be entitled to a subsidy of US$27.1 million. This will be funded through a combination of term/bridging loans and shareholder equity.
Orocobre managing director and CEO, Martín Pérez de Solay, believes this is a major milestone for the company.
He said: "We are excited to announce the approval of the Naraha project. The construction of the Naraha Lithium Hydroxide Plant will further cement Orocobre's position as a global lithium chemicals producer operating at the bottom quartile of the lithium cost curve. This new hydroxide plant will be the first of its kind in Japan and provides Orocobre product diversification suitable for different battery technologies and the potential for significant margin growth on our primary lithium carbonate being converted to battery grade lithium hydroxide."
Should you invest?
I think this is a positive development for the company, though it will be still some time before the company benefits.
Overall, whilst I think Orocobre could be a good investment, a lot will depend on where lithium prices go in the near term. If they bounce back from recent weakness then Orocobre, Galaxy Resources Limited (ASX: GXY), Pilbara Minerals Ltd (ASX: PLS) could provide strong returns for shareholders.
But until there are signs of this happening, I would suggest investors stay clear of the lithium miners and focus on other opportunities.
