Lithium Stocks - Is The White Metal In Crosshairs? Orocobre Limited Reports Key Updates

  • Oct 27, 2019 AEDT
  • Team Kalkine
Lithium Stocks - Is The White Metal In Crosshairs? Orocobre Limited Reports Key Updates

Lithium stocks have lately been one of the most talked about in the market due to the turmoil caused in production and pricing, predominantly due to the rising global tensions on account of US-China trade war. Following the dropping lithium prices due to fall in demand from the electric vehicles market, producers in Australia are now cutting supplies of lithium. As per media reports, demand for lithium has fallen majorly due to alteration of subsidies by Beijing to electric vehicle markers and also due to a rise in global trade tensions. Moreover, the producers do not see any good news coming in through year-end, from the demand standpoint.

Recovery of lithium is entirely dependent on the abatement of the tensions arising due to the trade war. Looking at the current scenario, settlement may not be seen anytime soon, which, in turn, will keep impacting the demand for lithium until the market sentiment is perked up. This has adversely impacted the Australian lithium producers, resulting in lower sales at lower prices, compelling them to reduce production.

Orocobre Limited (ASX: ORE)

Orocobre Limited is engaged in the exploration and development of lithium at its flagship Olaroz Lithium Facility and the operation of Borax in Argentina.

September Quarter Highlights - During the quarter ended 30 September 2019, the company reported the highest ever production in the quarter. Record production came in despite a full plant shutdown for five days due to extended maintenance activity during August. Moreover, one of the two reactor units, was also offline for the month.

  • Production stood at 3,093 tonnes, up 35% on prior corresponding period.
  • Sales revenue for the quarter stood at US$22.1 million, down 21% QoQ, due to lower pricing in comparison to the previous quarter.
  • Sales volume was reported at 3,108 tonnes, down 8% QoQ.
  • During the quarter, the company reported gross cash margins excluding export tax, amounting to US$2,226 per tonne, down 40% on quarter-on-quarter basis. The fall in gross cash margin was predominantly due to the lower average price received.
  • Cash costs for the three months period stood at US$4,885 per tonne, up 9% QoQ.
  • Cash available at the end of the quarter was reported at US$223.5 million.
  • Expenditure during the quarter was mainly in relation to funding Olaroz expansion activities, Cauchari JV expenditure and corporate costs.

Results Summary (Source: Company Reports)

FY20 Guidance: Production for FY20 is expected to report a minimum growth of 5% on FY19. In addition, average sales price in the December quarter in expected to be between US$6,200 – US$6,500 per tonne.

Stock Performance: The stock of the company generated negative returns of 17.27% and 19.01% over a period of 1 month and 3 months, respectively. The stock closed at $2.330 on 24 October 2019 and has a market capitalisation of $601.86 million.

Pilbara Minerals Limited (ASX: PLS)

Pilbara Minerals Limited is engaged in exploration and development activities at the Pilgangoora Lithium-Tantalum Project.

The company recently announced a Share Purchase Plan, wherein the company has determined to accept valid applications totalling approximately A$20 million. As per another recent announcement, the company updated on the completion of the A$55.0 million strategic investment, following the completion of A$35.0 million Tranche 2 placement by Contemporary Amperex Technology (Hong Kong) Limited (CATL). Total shares issued to CATL stood at approximately 183.33 million, issued at a price of A$0.30 per share.

FY19 Highlights:

  • The period ended 30 June 2019 was marked by the commissioning and ramp up of the Stage 1 Pilgangoora Project.
  • The period was marked by first shipment of spodumene concentrate to customers in October 2018, with commercial production declared in April 2019.
  • In addition, a positive Stage 3 scoping study to expand the processing capacity at the Pilgangoora Project to up to 7.5 Mtpa was also completed.

FY20 Targets:

  • Total recordable injury frequency rates for FY20 is targeted to be less than 4.0.
  • The company aims to achieve nameplate production capacity 300,000 lbs per annum of tantalite product and 330,000 dmt per annum of high-quality 6.0% spodumene concentrate.
  • Development of Pilgangoora Stage 2 is also being targeted for expansion of up to 5 Mtpa to produce 6.0% spodumene concentrate of approximately 800,000 to 850,000dmt.
  • Commissioning of the Stage 2 Pilgangoora Project is being targeted during December 2020 half-year or at a date ensuring alignment of additional production with customer requirements.

Stock Performance: The stock of the company generated negative returns of 16.18% and 41.84% over a period of 1 month and 3 months, respectively and has a market capitalisation of $633.76 million. The stock closed $0.280, down 1.754% on 24 October 2019.

Lithium Australia NL (ASX: LIT)

Lithium Australia NL is engaged in exploration, project acquisition and development, primarily with respect to lithium.

Recently, the company updated that it increased its equity stake in Envirostream Australia Pty Ltd (EA) from 18.9% to 23.9%, significantly enhancing its exposure to the process of collecting and separating spent lithium-ion batteries. To increase the stake, the company made a further investment of $100,000 in EA.

As per another recent update, the company notified that its subsidiary, VSPC, produced high-quality cathode material using refined lithium phosphate from spent lithium-ion batteries. The material produced actually exceeded the VSPC standards for electrochemical performance, confirming it to be an ideal feed for VSPC technology.

Outlook: The company is the sole business engaged in the production of battery-grade lithium chemicals from all lithium silicates through cost-competitive processing techniques. In addition, the company is continuously eyeing other projects worldwide and is reviewing opportunities in Europe, Australia, Africa and the Americas.

Stock Performance: Over a timeframe of 1 month and 3 months, the company’s stock generated negative returns of -4.26% and -11.76%. The stock closed at a market price of $0.045 on 24 October 2019 and has a market capitalisation of $24.04 million.

Lepidico Limited (ASX: LPD)

Lepidico Limited engages in mineral exploration and development, and development of propriety technologies namely, L-Max®, S-Max® and LOH-Max™. The company recently released an announcement stating that the 2019 Annual General Meeting will be held on 21 November 2019.

As per another recent update, the company reported that a high specification sample of caesium-rubidium formate brine was produced from Pilot Plant potassium circuit liquor. The sample has a specific gravity of 2.3. The characteristics of the caesium-rubidium formate are likely to meet the key criteria for oil and gas industry applications.

The company also notified the results from the recent Pilot Plant campaign and reported on the highest specification lithium carbonate of 99.95% purity, produced to date by L-Max®. The purity level exceeded the normal battery grade reference purity of 99.5% for many existing producers.

FY19 Financial Highlights: During the year ended 30 June 2019, the company reported a net loss attributable to shareholders amounting to $5.01 million as compared to prior corresponding period loss of $7.24 million. Net cash outflow from operations amounted to $3.50 million, up on prior corresponding period outflow of $3.04 million.

FY19 Income Statement (Source: Company Reports)

Stock Performance: The stock of the company generated negative returns of 22% and 51.86% over a period of 3 months and 6 months, respectively and has a market capitalisation of $83.57 million. The stock closed at a market price of $0.019, flat with respect to the previous close, on 24 October 2019.

Altura Mining Limited (ASX: AJM)

Altura Mining Limited, is a small cap company with the market capitalisation of $134.88 million as on 24 October 2019. The company is involved in construction of the mine and processing plant at its 100% owned Pilgangoora Lithium Project. The company recently updated that the 2019 annual general meeting will be held on 22 November 2019.

Capital Raising: As per another recent update, the company provided details on a capital raising of approximately $21.5 million through a non-renounceable entitlement offer of two fully paid ordinary shares for every thirteen existing shares. Another notification stated that no offer will be made to the ineligible shareholders under the offer. Proceeds from the issue will be utilised for exploration on the highly prospective tenements in the Pilbara, incremental capital works on the Altura lithium process plant at Pilgangoora, and funding of working capital following the ramp up to full production of 220,000 wet metric tonnes of spodumene concentrate.

September 2019 Quarter Highlights:

  • During the quarter, the company reported record production of 45,484 wmt of lithium concentrate, representing an increase of 7.3% on previous quarter.
  • In addition, production in September was the highest monthly production on record at 16,562 wet metric tonnes.
  • Production for the December quarter is expected to be in the range of 53,000 – 57,000 wmt as operational improvement initiatives continue to be rolled out.
  • Sales for the December quarter are expected to be between 50,000 – 55,000 wmt.
  • Operating cash costs are expected to be in the range of US$350 – US$380 per wmt for the December quarter.

Stock Performance: The company’s stock generated negative returns of 21.62% and 49.57% over a period of 1 month and 3 months, respectively. The stock closed at a market price of $0.058 on October 24, 2019, reporting no change on the previous day’s closing price.


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