American Pacific Borate and Lithium signs second Chinese offtake deal this week

Lithium commercialisation is gradually picking up a head of steam at American Pacific Borate and Lithium (ASX: ABR) after the company announced a second cooperation agreement with China National Chemical Fiber Corp. (CNCFC), a wholly owned subsidiary of Chinese state-owned enterprise China National Machinery Industry Corporation (Sinomach for short).

The deal is the second in as many days after American Pacific announced a deal with Sinochem Hebei Corporation, a subsidiary of Chinese state-owned enterprise Sinochem Group, yesterday.

Sinochem is one of four publicly-backed oil companies in China that also serves as the country’s leading chemical services provider and its largest agricultural input provider. Sinomach is a Fortune Global 500 diversified firm that functions as a prominent industrial equipment group in China.

The two deals represent a significant milestone for American Pacific as an emergent producer of borates with an inclusive lithium production operation also being tallied as part of its Fort Cady project in southern California.

Industry analysts have said that very few global sources of borates and demand remain with demand believed to be increasing at 6% per annum.

With borates and boric acid coming to the fore from a production standpoint, the company is also progressing a lithium brine operation from the same project site.

Under the terms of the non-binding agreement with Sinomach, American Pacific will supply its borates product to be sold in China.

The ASX-listed company revealed that it intends to establish a “binding sales contract” from its phase one boric acid production of 82,000 tonnes per annum. In its deal with Sinochem, the intention is to secure a binding off-take agreement for up to 40,000 tonnes of boric acid per year.

Both companies have said that they intend to finalise a deal lasting for an initial 5 years with an option to extend on “mutual agreement” sometime in 2023. However, American Pacific said that it will hold discussions with Sinomach with respect to long-term tonnage from phase two before 31 December 2018.

“The non-binding strategic cooperation Agreement with CNCFC continues to establish our path to market and demonstrates the strategic importance of borates within China. For many years Sinomach has been one of the largest consumers of borates in China and this agreement enables Sinomach to market and promote our borates to its own customers not only in China but across the world,” said Mr Michael Schlumpberger, CEO of American Pacific Borate and Lithium.

Mr Schlumpberger added that both the Sinomach and Sinochem deals indicate a strong market for borates in China and would help the company generate credible financing support for the Fort Cady project moving forward.

For its sales contracts to be finalised and formally executed, American Borate must still receive all relevant approvals and secure financing to commence production at Fort Cady.

Furthermore, American Pacific must still complete various “preparation work”, including providing Sinomach with samples, specifications and feasibility reports over the coming months.

Digging deeper into Fort Cady

Fort Cady is a highly rare and large colemanite deposit with “substantial lithium potential” according to American Pacific.

The project is currently the largest known contained borate occurrence in the world outside the hands of major borate producers Rio Tinto and Eti Maden.

As it stands, Fort Cady has a JORC mineral estimate of 120 million tonnes at 6.5% boric acid and 340 parts per million (ppm) lithium, including 58.59 million tonnes at 6.59% boric acid and 367ppm lithium in the indicated category.

In the inferred category American Pacific sports 61.85Mt @ 6.73% boric acid and 315ppm lithium. In total, Fort Cady holds 13.9Mt of contained boric acid according to the JORC estimate.

In total, more than US$50 million (A$66 million) has historically been spent at Fort Cady, including resource drilling, metallurgical test works, well injection tests, permitting activities and substantial pilot-scale test works.

American Pacific expects the Fort Cady Project can quickly be advanced to construction-ready status due to a large amount of prep work already completed since the 1980’s.