Mining players under scanner - Western Areas, Metals X and Orocobre

  • Dec 05, 2019 AEDT
  • Team Kalkine
Mining players under scanner - Western Areas, Metals X and Orocobre

The volatility in share prices of a company could come from internal as well as external factors. As for the mining sector, the commodity market dynamics and the factors intrinsic to the company’s operational and management activities drive the fluctuations in the share prices.

For Metals X, the dynamics behind the share prices movement could be primarily explained by the change in management structure, while for Orocobre, which primarily operates in Lithium commodity, has been experiencing continuous soft market conditions, not allowing the company to act aggressively to undertake expansion at the current operations.

As for Western Areas, the change in ownership structure explains the price fluctuations. The company’s acceptance and response to such changes pays off in future.

Metals X Limited (ASX:MLX)

Metals X announced the election of Mr Patrick O’ Connor as the new Non-Executive Chairman effective immediately as on December 3, 2019.

Patrick previously served the firm as the Non-Executive Director since October 24 of this year. Patrick has worked into bulk, precious commodity (coal, copper, lead, zinc, gold), oil & gas, biotechnology and utility domains. Previously, he served as the director of Stanmore Coal Ltd (ASX:SMR).

Additionally, he held roles as Chairman of Perilya Ltd which operated one of the country’s largest lead mine, the Broken Hill Lead mine. He also served as the director of the Water Corporation working on the utility sector. Patrick also worked as the chief operating officer of the OceanaGold Corporation (ASX:OGC), and during his tenure, the company turned public by listing on the ASX. Prior to which he worked as the Managing Director of Macraes Mining.

The recent month has been difficult for Metals X when it had to suspend its Nifty copper operations in the mid of November to focus on the development of Renison tin operations in Tasmania due to inability of the mine to give desired output at right cost.

Metals X backing on the long and diverse experience that Patrick brings on board elected and appointed him as the Non-Executive Chairman leading the company to better times.

The company also reported the resignation of Simon Heggen as the Chairman effective December 2,2019. Also, Damien Marantelli stepped down as the director effective from December 2 ,2019 but will stay with the company serving as the Chief Executive Officer for the interim transition period.

The company’s stock closed at AUD 0.110 on 5th December 2019, 4.76% up after registering its 52-week low on the previous day.

The company under the new management intends to expand its Renison tin operations by increasing the throughput from the underground operations to 920,000 tons while maintaining the process plant at 7,20,000 tonnes of ore annually. With the current market conditions, the expansion can catapult the Metals X to better times.

Orocobre Limited (ASX:ORE)

Orocobre released the update of price outlook for Lithium Carbonate for the December Quarter 2019. The expected weighted average freight on board (FOB) price for Lithium Carbonate has been revised to US$5,400 per tonne. The actual commodity prices depend on the shipping schedule and the market conditions so forth.

The company which operates Olaroz Lithium Facility had reported a decline of 13.5% over the September. Also, the cost of sales increased significantly with lowering Lithium product realized prices, further reducing the gross cash margin by 40.27%. The expected decline of 24% indicates a further decrease in the gross cash margin in the December quarter.

With the infirm market conditions and reluctance of producers to cut production, the prices would continue to lower in future. The lower demand from Chinese battery manufacturers further fuels up the lower prices. Although the current prices are not rewarding for upcoming greenfield projects to come on stream due to the decreasing margins. The company is working on optimizing its operating cash cost to restrict the impact on its operating margin. The company will provide an update for the March quarter as per the reporting schedule in future.

The company’s stock closed at AUD 2.36 on 5th December 2019, 0.43% up on ASX. The strong financials of the company support to take it comfortably through this period of market weakness. If the commodity prices continue to dip in future quarters, the company may either cut down on the production or stockpile its produce as inventory to be sold in future at higher prices.

Western Areas Limited (ASX:WSA)

Western Areas reported the disposal of Vinva investment share in the company. The company has been volatile since it reported the issuance of performance rights under the terms and condition of the stockholder approved Western areas employee share scheme on November 28. The company also reports the change in the equity ownership of the managing director and chief executive officer Daniel Lougher, increasing his shareholding by 428,130 shares.

Western Areas boasts itself to operate the highest grade nickel mines and falls in the lower quartile of cash cost. The company reported bush fire incident at Forrestania. The company’s stock closed at AUD 2.70 on 5th December 2019, 0.37% down on ASX.


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