Orocobre Is On An Upside Rally After The Release Of Investor Presentation

  • Nov 13, 2018 AEDT
  • Team Kalkine
Orocobre Is On An Upside Rally After The Release Of Investor Presentation

Orocobre Limited (ASX: ORE) with a market cap of $1.18 billion as on November 13, 2018  and corporate  cash balance of US$308.7M as on September 30, 2018, came up with its investor presentation report on November 13, 2018 i.e. today.

ORE’s normalized full year NPAT grew by almost 86% from US$13.8M in FY17 to US$25.7M in FY18. Gross operating margins were reported as 67% (at US$8,384/ tonne) with production cost amounting to US$4,194/ tonne. One of the key advantages over peer group is the low-cost profile maintained by the company. Company has well planned growth strategy and at present has interest in varied growth options such as Olaroz Stage 2 and Naraha Lithium Hydroxide, both of which are near to its final investment decision. It also holds longer term potential development at Cauchari JV.

Despite of two weeks’ shut down on account of maintenance of the plant, Olaroz posted 7% rise in the production up to 2.293 k tonnes during September quarter as compared to the same period last year. Recoded revenue of US$32m with sales of 2144m was reported.

Net cash posted for the Orocobre Group was at US$221.7 million on September 30, 2018. ORE posted reduction in the project debt balance up to $122m during September 2018, incurring a low average interest rate of 4.25% on it. Company has maintained its place as a low cost, high margin producer posting EBITDA of US$94.6M in FY18.

Orocobre holds 33.5% issued shares of Advantage Lithium (AAL). 33.5% of the shareholding along with 25% ownership in the Cauchari project makes total interest of Orocobre to be 46% in AAL.

Early work under Olaroz Stage 2 lithium facility with a capacity of 25000 tpa includes construction of new evaporation and harvest ponds, construction of new roads, drilling of new bores, construction of secondary liming plant and the expansion of existing site infrastructure or camp accommodation.

As on September 30, 2018, $10m has already been spent from the total committed amount of $40m prior to FID. FID expected this quarter will be subjected to TTC completing an EPC contract for the Naraha lithium hydroxide plant which will allow for the integration and the subsequent development of both the projects with its commissioning in 2H CY2020.

Total capex for stage 2 Olaroz lithium facility remains US$285 million (excluding VAT) as on September 30, 2018. Capex of US$140 million is allocated for the construction of wells and ponds. As on September 30, 2018, two new harvest ponds 17A,17B and one new evaporation pond 15B have been completed. Currently, five ponds are under construction.

Stage 3 Olaroz lithium facility drilling program is currently underway at Cauchari project site and the upgradation of the resource classification is expected by Q2 2019 that will support the project’s Definitive Feasibility Study (DFS). Olaroz growth projects are fully funded with expansion to 42500 tpa work underway and construction of 10,000 tpa lithium hydroxide plant to be done in Japan. With no current or announced hydroxide capacity in the country to date and strong fundamentals for the long-term lithium market, Naraha lithium facility will gain first-mover advantage in Japan.

Fully funded growth projects with strong margins supported the price move of ORE which is currently trading at the levels of $4.67, up 3.3% on November 13, 2018 (3 PM AEST).


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