Li3 Energy inks formal development deal with South Korea's POSCO for Maricunga

Lithium explorer Li3 Energy (OTCBB:LIEG) announced Thursday that it has, after months of negotiations, signed a formal agreement with South Korea-based industrial company POSCO (NYSE:PKX) for the joint exploration and development of Li3's Maricunga project in Chile.
POSCO, with operations in energy, chemicals and materials, is one of the largest steel manufacturers in the world, with $60 billion in annual revenues.
The South Korean company invests in several resource development projects globally, especially lithium properties.
This is because one of the primary uses for lithium is in the production of batteries for hybrid and electric vehicles.
As demand for these cars increase, so will the world's requirements for lithium, resulting in many battery and automakers in Korea and Japan partnering with lithium exploration companies to ensure a steady supply.
"We began earnest discussions in March of this year and to consummate this transaction in less than six months is testament to the extraordinary efforts by a dynamic, proactive and extremely professional team from POSCO and the cooperation and ability of Li3’s management team and advisors," said Li3 CEO, Luis Saenz.
Li3, with a controlling interest in Maricunga, is focused on implementing the exploration and development plan for the property, including securing well drilling contractors, seismic surveyors, and engineering firms, as well as the necessary government permits to advance the project.
Under the terms of the agreement between Li3 and POSCO, POSCO will initially invest $8 million through the purchase of Li3 units at 21 cents each. Each unit comprises one share of common stock and a three-year warrant.
In addition, POSCO has committed to a follow-on investment of $10 million additional units once certain conditions are satisfied, including an NI 43-101 compliant report that concludes that a feasibility study phase for the project is warranted, the completion of Li3's proposed work program, and having the necessary permits and approvals in place for operating a brine test facility on the property.
After the initial $8 million contribution, the two companies will discuss the development, financing and construction of a test facility on the Maricunga property. As part of the partnership, Li3 will also appoint a director nominated by POSCO to its board.
"Being chosen as one of their lithium and other minerals project partners, coupled with the financial and technical support this relationship brings and the potential commercial opportunities we hope to derive from a global strategic partner of this magnitude, we believe speaks to the strength of Li3, the merit of Maricunga, and potential of our future plans," added Saenz.
Maricunga has been independently ranked as one of the top eleven lithium projects in the world, with the potential to become the largest lithium-based salar in brine-bearing deposits.
The report by SignumBOX concluded that securing a multi-national strategic off-take partner was one of the missing elements that could elevate the project even further, said the company.
As this feat has now been achieved, the project has yet to secure Chilean government approvals, but once this is accomplished, the property will have even more upside potential.
Li3, which looks for lithium properties in Peru, Argentina and Chile, has begun the initial $3.8 million development work program on the project, placing Maricunga into feasibility stage. A preliminary economic assessment report is anticipated by the end of the fourth quarter.
Maricunga covers an area of approximately 1,438 hectares, comprising six concessions, and is located in the northeast section of the Salar de Maricunga in Region III of Atacama.