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Li3 Energy closes first tranche of funding with South Korea's POSCO

Li3 Energy (OTCBB:LIEG) said Wednesday that it has closed the first tranche of funding with its strategic partner, South Korea-based industrial company POSCO (NYSE:PKX), with the financing round totaling $8 million.

In August, lithium explorer Li3 announced that it had, after months of negotiations, signed a formal agreement with POSCO 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.

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 the two companies, POSCO intially invested $8 million through the purchase of Li3 units at 21 cents each, which has now been completed. Each unit comprises one share of common stock and a three-year warrant.

In addition, POSCO committed in August 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.

As part of the deal and concurrent with the closing of the first tranche of funding, POSCO's designated director Hyundae Kim was appointed to Li3's board, from which David Rector and Kjeld Thygesen also resigned.

Since November 2009, Kim has worked for POSCO, where he serves as a director in the growth and investment division, reviewing a number of investment projects and alternatives including mergers and acquisitions, joint ventures and organic growth projects. He has also previously worked for ILJIN Materials, a Korean business-to-business company, and the Korean Ministry of Commerce, Industry and Energy.

“We look forward to working together as we execute on all aspects of our development plan and advance the project towards completing the milestones for the second tranche of their investment, including, achieving a Measured and Indicated NI 43–101 Resource Report," said CEO of Li3, Luis Saenz.

"I am extremely grateful to the entire POSCO team for their efficient and collaborative effort allowing this transaction to close in such a short period of time.

"We welcome Mr. Kim to the Board where his leadership, experience and contributions will be of great value.”

The two companies are now set to discuss the development, financing and construction of a test facility on the Maricunga property, which 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.

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.