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Olaroz lithium facility update

Orocobre Limited (ASX: ORE, TSX: ORL) (ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“OrocobreÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ or ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“the CompanyÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ÂÂ) wishes to provide an update

on commercial and production estimates following the near finalisation of shipping schedules and

pricing outcomes.

 

Sales of lithium carbonate are expected to be approximately 5,000 tonnes for the December half year

at a price of US$12,470 per tonne, down approximately 8% on the June half. Production is expected

to be approximately 6,000 tonnes for the half year and remains in line with previous guidance for

FY19.

 

The pricing achieved recently has been affected by soft market conditions in China having a direct

impact on shorter term contracts resulting in December quarter prices of approximately US$10,800

per tonne on sales of approximately 2,850 tonnes.

 

There was also an indirect impact as a number of customers outside China have downstream exposure

to the Chinese market experiencing market/commercial pressure.

 

SP down 11.03% currently @ $3.47

Short positions @ 14/12/18 = 14.04%

https://www.shortman.com.au/stock?q=ORE

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  • 4 weeks later...

ORE gets a mention in the following article.

 

extract from The Bull's - 2018 ASX 200 Winners and Losers - http://www.thebull.com.au/premium/a/79480-...and-losers.html

 

A newcomer to share market investing would look at this list and wonder how four of the five stocks with the highest growth forecasts performed so poorly in 2018. Whatâââ€Å¡Ãƒ‚¬ÃƒÂ¢Ãƒ¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¾ÃƒÆ’‚¢s more, even a casual follower of business news has read of the coming emergence of Electric Vehicles (EVs). Hardly a person on the planet is unfamiliar with the lithium-ion battery that powers the electronic toys of today and the vehicles of tomorrow.

 

Three of those four worst performers are in the business of mining the metals needed to produce those li-ion batteries. Those three companies âââ€Å¡Ãƒ‚¬ÃƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“ Pilbara Minerals (PLS), Orocobre Limited (ORE), and Syrah Resources (SYR) along with satellite communications provider Speedcast International (SDA) are all in the ASX Top 30 Short List.

 

In the eyes of many retail investors, the short-sellers, or shorts, are the smartest people in the room since with the unlimited risks they face due diligence is a premium without which they cannot do.

 

The essence of short selling is borrowing shares at a given price and profiting when the price drops and the seller buys the shares at the lower price and pockets the difference. When the price goes the opposite way the losses keep mounting, theoretically to infinity, until the shorts panic and buy to cover. That means, in theory at least, the shorts need to be virtually certain a given stock is due for a downtrend.

 

So why would they bet against EVs and their battery packs? Retail investors who have been in the game for awhile know how quickly a red-hot sector can freeze over. In the fire-up stage investors rush in to buy and producers rush in to produce more of whatever has caught fire, thus inadvertently lowering the price. Orocobre and Pilbara are in the lithium business while Syrah is a graphite producer. Initially the shorts appear to have latched on to the falling price of both graphite and lithium as the perception crept into the market that supply was outstripping demand. In addition, some experts were questioning the extremely optimistic forecasts for EV demand in the next decades.

Now there is a new concern; one that was always there and has now bubbled to the surface. The truth is the lithium-ion battery may not be the technology of tomorrow as it has serious drawbacks. Right now, cobalt, graphite, nickel, and manganese are in the mix but research efforts for alternatives abound. The industry was shocked in mid-2018 when Teslaâââ€Å¡Ãƒ‚¬ÃƒÂ¢Ãƒ¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¾ÃƒÆ’‚¢s CEO Elon Musk made the claim that cobalt, once the must have metal, would be less evident in Tesla batteries in favor of increased nickel content, a cheaper metal.

 

That could have served as a reminder of the potential of other minerals falling out of the mix in the future. The price of both lithium and graphite has been volatile over the past several years, but both are improving.

 

While the price of both metals fell due to the oversupply issue, lithium recovered more quickly than graphite. Now the concern for graphite has shifted to shortage concerns with the price gradually improving in 2017. The following graph is from Canadian producer Northern Graphite.

 

All three of these companies are on the cusp of major production capability and at the very least deserve a spot on any investorâââ€Å¡Ãƒ‚¬ÃƒÂ¢Ãƒ¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¾ÃƒÆ’‚¢s watchlist.

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  • 7 months later...
Highlights:

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ Statutory Group net profit of US$54.6 million for FY19 includes a number of one off items. Underlying NPAT of US$24.8 million is down from US$25.7 million in the previous corresponding period

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ Underlying EBITDAIX is US$54.1 million, down from US$86.7 million

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ Total production of 12,605 tonnes of lithium carbonate

 

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ Strong results from the Olaroz Lithium Facility:

- revenue of US$124.7 million, on sales of 12,080 tonnes of lithium carbonate

- EBITDAIX of US$60.9 million, after deducting export tax of US$7.5 million

- average price received of US$10,322/tonne FOB, down from US$12,578/tonne FOB in PCP

- gross operating cash margins of 58% with lithium production costs3 of US$4,302/tonne up from US$4,194/tonne in FY18, making Olaroz one of the lowest cost producers of lithium chemicals in the world

- gross cash margin of US$6,020/tonne, despite lower prices

 

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ As of 30 June 2019, Orocobre Group had cash of US$279.8 million.

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ Final Investment Decision approval for Stage 2 Expansion of the Olaroz Lithium Facility andNaraha Lithium Hydroxide Plant given by Orocobre, Toyota Tsusho Corporation and JV boards. Finance now completed for both projects

.... sentiment is against it. ( Not to mention oversupply and sheer uncertainty)

 

Outlook, Guidance and Data

Subject to market and operating conditions Orocobre provides the following guidance:

Olaroz Lithium Facility

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ Orocobre expects full year production (FY20) will be at least 5% higher than FY19

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ Further to the soft lithium carbonate pricing experience in the June half, Orocobre expectsthe average sales price for the September 2019 quarter to be approximately US$7,250 pertonne (FOB)

 

Borax Argentina

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ Production forecast of 45-50,000 tonnes for FY20

 

Corporate

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚¢ Cash corporate costs will be US$8.5 - 9.5 million, including costs related to the Stage 2 Expansion and the Naraha Lithium Hydroxide Plant

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Orocobre downgraded to neutral at JPMorgan, price target slashed 20pc

Sarah Turner

 

JPMorgan cut its rating on lithium producer Orocobre to neutral and slashed its price target by 20 per cent to $2.30 a share.

 

"Production of 3,093 tonnes was a record for the September quarter but still short of our expectations," the broker said.

 

At the same time, costs rose 9 per cent quarter on quarter to $US4,885 per tonne, it noted.

 

"Expectations for the December quarter are for an even lower realised price of US$6,200-6,500 per tonne, meaning margins are skinny once we include royalties and the export tax."

 

JPMorgan further reduced its realised price forecasts for fiscal year 2020, cut its fiscal year 2020 and fiscal year 2021 production estimates, and increased unit cost assumptions.

 

"We remain attracted to the EV raw material sector and Orocobre's assets in the long term. But with excess inventory in the supply chain and majors keen to maintain market share, lithium prices could stay weak for a while," the broker said.

 

https://www.shortman.com.au/stock?q=ORE

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  • 10 months later...

ORE is raising approximately A$126 million / US$91 million from a Placement and will issue approximately 50.0 million new fully paid ordinary shares, representing 18.1% of the existing shares on issue.

 

 

Proceeds from the Equity Raising will be used to allow the Company to fully fund Olaroz Stage 2 and deliver the Olaroz Stage 1 ramp up through a range of operating, COVID19 and pricing environments, as well as capital for future growth initiatives.

The Placement issue price of A$2.52 per share represents a 13.1% discount. Plus a SPP with a discount IF the VWAP drops too low!!

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  • 7 months later...

Orocobre and Galaxy said they will merge via a Galaxy scheme of arrangement, under which Orocobre will acquire 100 per cent of the fully paid ordinary shares in Galaxy. Galaxy shareholders to receive 0.569 new fully paid ordinary shares in Orocobre for each Galaxy share held.

 

Upon completion of the scheme, Galaxy shareholders will own 45.8 per cent of the fully diluted share capital of the combined entity and Orocobre shareholders will own the remaining 54.2 per cent, reflecting an at-market merger.

 

The merger creates a leading ASX lithium company with about 40ktpa LCE production capacity and a top 5 lithium company globally.

 

Proforma market capitalisation has been estimated at $4 billion. The combined entity is expected to be included in the ASX 200 index and approach ASX 100 index thresholds.

 

The deal has been unanimously recommended by the Galaxy board, subject to no superior proposal emerging for Galaxy, and the independent expert concluding that the scheme is in the best interests of Galaxy shareholders.

 

Each Galaxy director intends to vote all the shares that they hold in favour of the Scheme, subject to the same qualifications.

 

Martin Rowley will be appointed non-executive chairman and Robert Hubbard will be appointed deputy chairman.

 

Both Mr Rowley and Mr Hubbard will retire from their roles within 12 months of implementation. They will lead a process to ensure that the longer term board composition is ideally placed to lead the merged entity forward

 

Martín Pérez de Solay will remain as CEO and managing director of the combined entity while Simon Hay will assume a newly created role as President of International Business reporting to the CEO.

 

Orocobre said it produced a record 3,232 tonnes of lithium in the March quarter, up 18 per cent on the previous corresponding period.

 

 

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Seeing how Orocobre is not paying any premium for the Galaxy shares I wonder whether one of the big boppers in the sector will attempt to come over the top. If the Chinese really want to dominate this market then money should be no object for them. Orocobre and Galaxy have a no talk, no due diligence rule in place so if another bidder emerges they will have to go on public info and a conviction that this lithium cycle is just kicking off.
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Galaxy chief executive Simon Hay, who previously worked for BHP, said the surge in lithium prices over the past nine months was more sustainable than the boom that occurred between 2014 and 2018.

This time around the demand has a lot more legs, it is a lot more durable, he told The Australian Financial Review on Monday. Previously, China spoke for three quarters of demand and growth. Now we see Europe is outpacing China in growth and in gross numbers of tonnage of lithium, and North America is just emerging, so you will have three major growth fronts, not just one. So that is why we are really confident in the demand projections.

 

Mr Hay – who will be president of international business for the merged entity – said there was no intention to push the market into oversupply again.

 

A lot of the producers, and Orocobre and Galaxy are in this club, are definitely rational. We have both taken tonnes offline when we needed to and most of the majors are doing the same, so I think that helps in stabilising the lithium industry, he said.

 

 

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