Orocobre Limited Stock Market Press Releases and Company Profile
Quarterly Activities Report
Quarterly Activities Report

Brisbane, Oct 28, 2016 AEST (ABN Newswire) - Orocobre Limited (googlechartASX:ORE) (googlechartTSE:ORL) (googlechartOROCF:OTCMKTS) is pleased to provide the company's latest Quarterly Activities Report.

HIGHLIGHTS

OLAROZ LITHIUM FACILITY (ORE 66.5%)

- Sales revenue of US$33.5 million; representing the first full quarter of commercial production and up 45% quarter on quarter

- Average FOB price received for the September quarter was up 24% from May/June 2016 to US$9,334/tonne. Cash operating costs were US$3,579/tonne resulting in strong operating margins

- September quarter production was 3,013 tonnes* with record monthly tonnage of 1,125 tonnes achieved in September

- Sales de Jujuy S.A. self funded a US$12.8 million principal and interest payment for the Mizuho project loan during the quarter

- The scoping study for the Olaroz Stage 2 expansion of 17,500 to 25,000 tonnes per annum lithium carbonate equivalent (LCE) is complete, results are being compiled and will be released shortly

BORAX ARGENTINA

- Sales volume in the quarter was 11,940 tonnes, representing a 29% increase quarter on quarter and a 47% increase on the corresponding quarter last year, excluding sales of low value tincal ore

- Unaudited Earnings before Interest Tax Depreciation Amortisation and Forex ( ''EBITDAX'') breakeven, negatively affected by the commissioning of the modifications at the boric acid plant in Campo Quijano

- Tincalayu borax plant expansion and modifications completed in the previous quarter were fully commissioned and ramping up in production rate during the quarter. The changes at the Campo Quijano boric acid plant were completed in July and undergoing commissioning during the quarter. These modifications are expected to result in improved unit costs at both facilities

- Expansion studies to achieve increased production at Tincalayu commenced in the June quarter with a scope of 100-120,000 tonnes per annum borax decahydrate equivalent production and development of a circa 25,000 tonne integrated boric acid plant

CORPORATE

- As the Company now generates signficiant revenue and cash flow from production activities, the ASX has re-classified it a production company and as such it will no longer lodge an Appendix 5B. The company will disclose key financial performance indicators in this Quarterly Operations Report

- Orocobre has a strong cash position of US$32.2 million from a corporate perspective excluding restricted cash on hand (i.e. cash committed to Standby Letters of Credit (SBLC) at the end of the quarter)

- The Orocobre share price has been negatively impacted by a significant increase in short selling activity since late August, which now exceeds historical levels at more than 7% of issued capital. A significant portion of this has been bought by the Company's Top 20 shareholders

OLAROZ LITHIUM FACILITY

The Olaroz Lithium Facility is Orocobre's flagship project located in the Jujuy province of Argentina. Together with partners, Toyota Tsusho Corporation (TTC) and Jujuy Energia y Mineria Sociedad del Estado (JEMSE), Orocobre is now operating the first large scale lithium brine plant to be commissioned in approximately 20 years.

The Olaroz Lithium Facility joint venture is operated through Argentine subsidiary Sales de Jujuy SA (SDJ SA). The effective equity interests are: Orocobre 66.5%, TTC 25.0% and JEMSE 8.5%.

PRODUCTION, SALES AND GUIDANCE

Sales revenue for the September quarter was US$33.5 million representing the first full quarter of commercial production and sales from the Olaroz Lithium Facility. Pro-rata sales tonnes (based off May/June) were up 17% while the average price received was up 24%. Cash operating costs were US$3,579/tonne resulting in strong operating margins.

Strongly positive operating cash flow continued in the September quarter which allowed Sales de Jujuy S.A. to self fund a US$12.8 million principal and interest payment for the Mizuho project loan. Positive operating cashflow is now expected to be an on-going feature of the business.

Production in the month of September was a record 1,125 tonnes. September quarter production and operating costs were impacted by a 10 day mechanical outage in the drying circuit during August but still remained higher than the June quarter. Production in the December quarter is forecast between 3,500 and 4,000 tonnes.

The focus continued to be on improvements in operating practice, plant optimisation and process control. With the operation consistently achieving good performance in the primary circuit, the focus has been the purification circuit. Following various minor modifications, the circuit is now operating with improved control, increased residence times in reactors and good temperature profiles through all parts of the circuit. In addition, changes to carbon dioxide injection points and diffusor design modification have resulted in the elimination of "in process" material and the achievement of more stable operating conditions throughout the circuit.

Production in the purification circuit is currently limited due to restricted thickener residence time post the purified product crystallisers. Throughput will be increased in the December quarter by adding a cyclone bank to augment the thickener capacity. The thickener is the final step in the purification circuit prior to product entering the drying circuit.

BRINE INVENTORY

At the end of the quarter, brine inventory was approximately 39,900 tonnes of lithium carbonate equivalent.

SALES ORDERS

Commercial shipments of lithium carbonate continue to be dispatched from the Olaroz Lithium Facility to Europe, Asia and the USA. Normal production is sold as either battery, technical or industrial grade products and sold into the chemical manufacturing, industrial and battery application sectors. Commercial dispatches of high purity product to battery market customers continued during the quarter and additional customers will be supplied in the December quarter.

The September quarter sales price was up 24% against the June quarter to US$9,334/tonne. The customer orders fulfilled during the quarter included a significant number of back orders that were priced at levels much lower than current contract levels and the weighted average price achieved is of course dependent upon the mix of customer orders fulfilled during the quarter which is influenced by a number of factors including shipping schedules. The Company maintains price guidance on an FOB1 basis for the December quarter at approximately US$10,000/tonne. Strong market demand and supply side constraints are expected to maintain robust market prices for lithium carbonate.

SHORT-TERM LITHIUM MARKET OUTLOOK

Contract prices increased from the June quarter to the September quarter. Following strong demand thoughout the year China's spot prices softened slightly during the quarter but contract prices continued to strengthen including those achieved by Orocobre.

The Chinese EV market has softened on the back of a review of the government subsidy policy which is due to be completed in the next month. It is expected that there will be some consolidation of EV manufacturers with a resultant decrease in the total number of EV manufacturers in China. There is some inventory build occurring at cathode manufacturers in China in anticipation of an upturn in battery demand in Q4 2016 and into Q1 2017.

All available forward indicators of market demand remain positive including:

- Announcement of subsidy policy changes in China for electric vehicle production expected shortly

- China EV targets remain at five million vehicles by 2020 including 200,000 buses and three million EVs per annum by 2025

- On-going replacement of lead acid batteries by Li-ion batteries, even in traditional uses such as automotive SLI (starter, lights, ignition) batteries

- Continued construction of EV gigafactories with seven plants currently being built and 12 expected by 2020

- There are more than 100 Li-ion battery manufacturers in China

- Growing demand for energy storage as evidenced with Southern California Edison committing to an 80MWh Li-ion storage system for management of peak electricity loads

- Glocal consumer interest in EV's continues to grow - over the next two years, 25 new makes and models of electric cars have been announced for release

- Continuing strong demand from other (non-EV) battery applications including mobile phones, laptops and tablets

- Healthy demand from traditional end-use markets

The Company's short term outlook is for increasingly tight market dynamics in lithium markets with new supply being further delayed.

EXPANSION STUDY FOR OLAROZ

A scoping study to evaluate a potential Stage 2 expansion of 17,500 to 25,000 tonnes per annum has been submitted to the joint venture partners for review and will be released shortly. The study assessed construction of a similar plant to the existing Olaroz Lithium Facility. Lithium hydroxide production is also considered.

PLANS FOR CAUCHARI

Further drilling of Cauchari is planned in FY17 to define a larger resource and conduct pumping tests. The Environmental Impact Study is being considered by Unidad De Gestión Ambiental Minera Provincial (UGAMP) in November. Cauchari is immediately south of the Olaroz plant, with an inferred resource of 470,000 tonnes lithium carbonate equivalent, 1.6 million tonnes potassium chloride and 122,000 tonnes boron. Cauchari has potential for incremental production to feed into the expanded facilities at Olaroz.

MOU FOR DEVELOPMENT OF LITHIUM HYDROXIDE PLANT

Orocobre continues negotiations in relation to the next stage under the MOU. For further details, please refer to the Company's announcement "MOU for Development of Lithium Hydroxide Plant", 13 November, 2015.

BORAX ARGENTINA

Unaudited EBITDAX was breakeven and negatively affected by the commissioning of modifications at the boric acid plant. Borax Argentina is expected to move into positive EBITDAX in the December quarter as operations achieve greater stability.

The focus this financial year (FY17) is to improve production rates and unit costs following the optimisation projects at Tincalayu and Campo Quijano and improve efficiencies, build suitable inventory levels, improve response times, delivery performance and reinforce Borax's value proposition as the producer integral to a customer's security of supply strategy.

OPERATIONS

A total volume of 11,940 tonnes of combined product was sold during the quarter. This is an increase of 2,666 tonnes on the previous quarter and 3,816 tonnes on the corresponding quarter last year, on a comparable basis excluding sales of low value tincal ore. There were no tonnes of tincal ore sold this quarter.

PRODUCTION IMPROVEMENT PROJECTS COMPLETED

The Tincalayu borax plant expansion and modifications completed in the previous quarter were fully commissioned and ramping up in production rate during the quarter. On-going benefits of the recent works include lower unit production costs for both decahydrate and pentahydrate and additional options to export finished product directly from Tincalayu to international markets via Chilean ports.

Modifications of the boric acid plant at campo Quijano were completed in July and undergoing commissioning during the quarter. Recent production rates above 30tpd have been achieved, in line with expectations.

The modifications at both Tincalayu and Camp Quijano are expected to result in improved unit costs at both facilities.

TINCALAYU EXPANSION STUDY

A study commenced in Q2 CY2016 to evaluate a potential expansion of the Tincalayu refined borates operation from its current production capacity of 30,000 to 100-120,000 tonnes per annum and an integrated 25,000 tonne boric acid plant.

It is anticipated that the potential expansion will further enhance efficiencies in the production of refined borates at Tincalayu and contribute to improved manufacturing unit costs. This study will consolidate the work already undertaken on a new gas pipeline, for which permitting is underway.

It is anticipated the study will be completed early in CY2017.

MARKET CONDITIONS

Tonnes sold in the quarter are up 47% on the corresponding period last year (11,940 tonnes vs 8,124 tonnes).

Borax Argentina has also been pursuing an ongoing geographic and product diversification strategy in order to better insulate the business from localised economic and market cycles. In addition to its traditional markets in South America, the Company now has a geographically and market diverse range of customers.

To view the report, please visit:
http://abnnewswire.net/lnk/210Q1Z9C


About Orocobre Limited

Orocobre Limited (ASX:ORE)Orocobre Limited  is listed on the Australian Securities Exchange and Toronto Stock Exchange  (ASX:ORE) (TSE:ORL) (OTCMKTS:OROCF), and is building a substantial Argentine based industrial chemicals company through its portfolio of lithium, potash and boron assets. In partnership with Toyota Tsusho Corporation (TTC) and JEMSE, Orocobre has built and is now operating the world's first commercial, brine-based lithium operation constructed in approximately 20 years.

In 2018 Orocobre announced the Stage 2 Expansion of its flagship Olaroz Lithium Facility in Argentina. The Stage 2 Expansion will add 25,000 tpa of lithium carbonate production capacity, taking full production and capacity to 42,500 tpa of lithium carbonate for sale to industrial, technical and battery markets, positioning Orocobre as one of the world's largest and lowest cost lithium chemicals producers.

Additionally, Orocobre and Toyota Tsusho Corporation have commenced construction of the 10,000 tpa lithium hydroxide plant in Naraha, Japan. The construction of the Naraha Lithium Hydroxide Plant will further cement Orocobre's position as a global lithium chemicals producer operating at the bottom quartile of the lithium cost curve. This new hydroxide plant will be the first of its kind in Japan and will provide Orocobre product diversification suitable for different battery technologies and the potential for significant margin growth on our primary lithium carbonate being converted to battery grade lithium hydroxide.

https://twitter.com/OrocobreLimited https://www.facebook.com/OrocobreLimited/ https://www.youtube.com/channel/UCuLtQ_xM61u8EFUzUa8YG_Q https://au.linkedin.com/company/orocobre-limited abnnewswire.com 


Contact

Richard Seville
Managing Director
T: +61-7-3871-3985
M: +61-419-916-338
E: rseville@orocobre.com

David Hall
Business Development Manager
T: +61-7-3871-3985
M: +61-407-845-052
E: dhall@orocobre.com



ABN Newswire
ABN Newswire This Page Viewed:  (Last 7 Days: 3) (Last 30 Days: 19) (Since Published: 3899)