Eco Investor February 2018

Pre-Dividend Securities

Record High for Orocobre

Orocobre's shares reached an all time high of $7.44 in late January, having been only $2.60 last March. The run is well deserved given the time, capital and work it has taken for the company to begin lithium production at its salars in Argentina.

What the share price will do now is another matter.

But we can say management is on the ball as it has used the high share price and news of record lithium production to raise new capital. The company is raising $361 million to accelerate the Phase 2 expansion at its main Olaroz lithium facility in Argentina to 25,000 tonnes per annum. This will take total production capacity to 42,500 tpa and position Orocobre as one of the world's largest and lowest cost lithium chemicals producers, it said. Commissioning of the expansion is expected in the December half of 2019 and operating costs for Phase 2 are expected to be lower than for Phase 1.

The $79 million underwritten 1 for 20 entitlement offer is at $6.55 per share. The institutional offer has been completed and the retail offer is underway. A two part $282 million strategic placement to Toyota Tsusho Corporation is at $7.50 per share.

The record December quarter production was 3,937 tonnes, up 84 per cent on the September quarter. Costs were good at US$3,946 per tonne while pricing was US$11,550 per tonne. Sales revenue was up 72 per cent on the previous quarter to US$40 million.


Orocobre’s production and sales.

The record share price may also have been assisted by higher prices to come. Managing director and chief executive, Richard Seville said lithium carbonate delivery quantities and pricing have been finalized for 85 per cent of the June half 2018 production. "Tight market conditions have resulted in increased contract prices being negotiated which, combined with orders carried over from 2017, are expected to result in pricing for the June half 2018 approximately 25 per cent higher than prices received in the December half 2017. The company will meet previous pricing guidance for the December quarter of more than US$11,000/tonne.

"Contract prices are rising in all markets and we expect this to continue in the foreseeable future as new demand for lithium chemicals exceeds new supply."

Orocobre and Toyota Tsusho Corporation are finalizing plans to develop a 10,000 tpa lithium hydroxide plant in Fukushima, Japan. A final investment decision is expected in mid year.

Orocobre has also released a sustainability report. (ASX: ORE)


Orocobre's all time share price.

 

 

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