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Orocobre Ltd
Symbol ORL
Shares Issued 132,041,911
Close 2014-10-23 C$ 2.72
Market Cap C$ 359,153,998
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Orocobre defines exploration target at Olaroz

2014-10-23 08:13 ET - News Release

An anonymous director reports

OROCOBRE LIMITED OLAROZ PROJECT LARGE EXPLORATION TARGET DEFINED

Orocobre Ltd. has made progress regarding the quantification of additional lithium brine within the Olaroz salar that may contribute to additional expanded production at a lower brine supply development cost than the current phase 1 development.

Deeper lithium brine exploration target

Geological background

The 2011 resource estimate at Olaroz was based on relatively shallow drilling to a depth of approximately 200 metres. The drilling intersected an interbedded sequence of sand, silt, clay and halite layers, as described in detail in the National Instrument 43-101-compliant technical report document dated May 13, 2011. The resource has an average free draining porosity of 10 per cent and the sediments are generally relatively low permeability units resulting in a bore field design of production wells with average flow rates of approximately 10 litres per second as set out in the aforementioned technical report. Geophysics (gravity surveying) conducted by Orocobre in 2009 suggested the Olaroz salar sediments extend to approximately 600 metres below surface. Electrical geophysics (a magneto telluric survey) and drilling by Lithium Americas Corp. to 450 m depth on adjacent properties strongly suggested that brine continues below the base of the current Olaroz resource. Of particular interest, was the potential for sand units intersected below 200 m in the narrow Cauchari basin to extend north into the much wider Olaroz basin.

Taking into account these observations and the presence of sand beneath halite units at similar depths in the company's drilling in Cauchari properties Orocobre has always considered the potential high for significant additional brine resources beneath those defined to date by the company.

Bore field development

The Olaroz project currently consists of two bore fields with 200 metre deep bores with well screens over the majority of their lengths, to maximize brine inflows which extract brine from the current resource to 197 m. The design of the bore fields was to provide flow at 180 l/s with two bores off-line at any one time. The location of these bore fields is shown in an image on the company's website, in the northeast and southwest of the Olaroz salar (salt lake). These bores pump brine to a series of tanks where the flows are combined before being transferred to the evaporation ponds.

In order to increase the peak flow rate to above 230 l/s and to allow a faster buildup of lithium brine stock, the company has drilled two additional bores, P301 and P302. Additionally, in order to test the exploration potential beneath the current resource, these bores were drilled to 304 m and 323 m, respectively, rather than the normal 200 m. The first hole, P301, was designed to allow the installation of eight-inch internal casing and a six-inch-diameter pump as for previous bores, while the second hole, P302, was designed to allow the installation of 10-inch internal casing and higher-flow eight-inch pump after the results of P301.

Drilling results and significance

Hole P301 was drilled to a depth of 304 m below surface in April, 2014, with an installed casing depth of 290 m. This hole encountered the expected sequence from zero to 200 m and then intersected a sand unit from 255 m, with continuous sand from 275 m to the end of the hole, confirming the extension of sandy units intersected in Cauchari into Olaroz.

Because of the results of P301, P302 was designed to be drilled to a depth of 350 m to further evaluate the sand unit encountered in P301 along strike and to greater depths and at a larger diameter to allow a higher pumping rate. The hole intersected a continuous sand unit from 220 m to 323 m before being terminated due to hole instability caused by intersecting gravel beds. Bore P302 was installed to a depth of 309 m, with screen intervals beginning at 102 m from surface.

These results are highly significant as this thick sand sequence may extend laterally beneath much of the defined brine resource and also to greater depths. Sands of this type have free draining porosity of between 20 and 25 per cent based on previous testwork, and the sand unit could hold significant volumes of lithium-bearing brine which could be added to the resource base by future drilling. In addition, due to the thickness of the sand, any production bore drilled into this unit will be high yielding compared with bores only in the top 200 m.

Bore construction and pump testing

Bore P301 was drilled with a diameter of 14 inches, with pipe and filters of eight inches installed to a depth of 200 metres. Below this depth the pipe and filters were installed with a six-inch diameter and a telescopic reduction to a total depth of 290.25 metres. A gravel pack of one-to-three-millimetre material was installed around the screens, which have a 0.75 mm slot width. A three-stage step test conducted on this bore shows that the bore is high yielding and highly efficient (95 to 98 per cent over the range tested). However, due to the limitation of the pump size to six inches within the eight-inch well casing this hole is construction and pump limited and the current pump rate is approximately 18 l/s. Bore P301 averaged 762 millilgrams per litre lithium (Li) during October, with a low Mg/Li ratio of 2.2.

P302 was drilled with a larger diameter to establish what flow the deeper sand aquifer is capable of, as the diameter of bore P301 limited the overall flow. P302 has a 14-inch external diameter, with 10-inch stainless steel casing installed to a depth of 150 metres, to allow for the installation of a larger diameter and higher capacity 75-horsepower pump in this upper part of the hole. The lower part of the bore, to an installed depth of 309 metres, was constructed with six-inch-diameter stainless steel pipe.

An attempt was made to carry out a step test on the hole with an installed pump with 65 hp capacity. The well flowed at 31 l/s during the test, but it was not possible to reduce the flow sufficiently with this pump to conduct a viable step test. On this basis the company is evaluating the requirements for a pump to conduct a new step test at rates of 40 l/s or more. This is the highest flow rate of any well currently installed in the Olaroz or Cauchari salars and it is expected the bore could yield up to 50 l/s when finally equipped.

Sampling of the bore since connection to the production pipeline has given an average lithium concentration of 650 mg/l Li, with a low Mg/Li ratio of 2.1, similar to that of the operating bore field brine.

Geology and sedimentology

The salars (salt lakes) developed in the Puna region of Argentina contain a mixture of clastic sediments (gravel, sand, silt and clay) from transport of sediments into the salar basin from the surrounding hills and from rivers flowing into the salar basins. Sediments typically become finer grained toward the centre of the salars, which are a lower energy depositional environment. The salars also contain chemical sediments (predominantly halite, with some carbonates and gypsum) that accumulated during periods of lower clastic sedimentation. Over geological time the distribution of sediments within the salars changes, as rivers and alluvial fans contributed different levels of sediment and in response to wetter and drier climatic periods influencing the deposition of chemical sediments.

The Olaroz bore fields are developed within predominantly finer-grained sediments deposited within the top 200 m of the salar. The deeper sand unit intersected in drilling P301 and P302 is interpreted to represent coarser alluvial fan sedimentation within the salar basin, preceding the deposition of the finer-grained sediments. This coarser sedimentation is interpreted to be sourced from the western side of the salar, and possibly represent an older equivalent to the extensive Archibarca alluvial fan that exists in this area today.

The thick sand unit identified in holes P301 and P302 is interpreted to be a lateral equivalent to the older alluvial fan deposits identified in third party drilling in Cauchari, to the south of Olaroz. Those sands host an important part of the third party resource in the Cauchari salar. It is uncertain how far the sand units extend into the centre of the Olaroz salar and the bore field areas, but they may conceivably extend across the salar, with coarser sediments also deposited from the eastern side of the salar at an equivalent depth.

P301 encountered the top of the sand unit at 255 metres, with the unit extending beyond the end of the hole at 304 m. P302 intersected the top of the sand unit at 220 metres, with the sand (and some gravel) extending below the base of drilling at 323 metres, a thickness of greater than 100 metres. A conceptual cross-section through the salar is shown in an image on the company's website.

Exploration target definition

Orocobre considers discovery of the thick (greater than 100 metres) deeper sand unit in P301 and P302 (separated by 1.2 km) is strategically important for the company, as it provides a potentially high flow rate additional brine supply for future development reducing the capital cost. The contained lithium potential of this sand unit has led the company to define an exploration target that will require further drilling to evaluate. At this stage the exploration target is being confined to the interval from 197 m to the 323 m total depth of P302, but there is clearly potential for further targets to the bottom of the basin at approximately 600 m.

This exploration target extends beneath the existing resource defined by Houston (technical report on the Salar de Olaroz lithium-potash project, May 13, 2011) and is outlined in a table on the company's website.

The relationship of an exploration target to the CIM and JORC resource definitions is shown in an image on the company's website.

It must be stressed that an exploration target is not a mineral resource. The potential quantity and grade of the exploration target are conceptual in nature, and there has been insufficient exploration to define a mineral resource in the volume where the exploration target is outlined. It is uncertain if further exploration drilling will result in the determination of a mineral resource in this volume, however, information from P301 and P302 suggests this is likely.

The exploration target is where, based on the available geological evidence, there is the possibility of defining a mineral resource.

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