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Lithium developer Kidman Resources has scored a $US100m loan from joint venture partner SQM to partially fund construction at its Mt Holland lithium project in Western Australia.

The Kidman (ASX:KDR) share price was up about 10 per cent to $1.21 on the news in early Thursday trade.

The Mt Holland project, a joint venture with the world’s largest lithium miner SQM, will produce lithium concentrate from Mt Holland which will then  be treated at a refinery in Kwinana near Perth.

The operation was expected to produce about 45,000 tonnes per year of high value, battery-grade lithium hydroxide.

Kidman boss Martin Donohue said this showed  SQM’s confidence in Kidman and the project.

“The US$100m capex facility, available to fund Kidman’s contribution to the Mt Holland lithium project, together with SQM’s matching contribution and the further US$60m milestone payment due, is such that today’s announcement is a meaningful portion of the total capital cost for the project ($US300 million, Kidman share) announced earlier this week,” he said.

“The facilities will provide Kidman with significant flexibility to commence construction of the project in 2019 while we put in place a long-term funding package.”

The Kidman (ASX:KDR) share prices has recovered off early October lows of 85c.
The Kidman (ASX:KDR) share price has recovered off early October lows of 85c.

Discussions with traditional debt financiers are also progressing well, Mr Donohue said.

A pre-feasibility study is expected to be released in in the current quarter, with the definitive feasibility study estimated to follow in the first half of next year.

Miners usually undertake four different types of studies when examining the potential of a resource. These are scoping, preliminary feasibility (PFS), definitive feasibility (DFS) and bankable feasibility (BFS).

These determine whether or not a resource can be mined economically.

A final investment decision on the lithium project was expected shortly after the DFS was complete.

Kidman Resources can lay claim to being the first Australian lithium miner to strike a supply deal with American electric car giant Tesla.

Kidman has locked in a three-year, fixed-price take-or-pay agreement with two more three-year term options to supply lithium hydroxide to Tesla.