Orocobre Records 32 per cent Plunge in Quarterly Revenue, While Syrah Takes a Hit of 62.5 per cent

  • Apr 23, 2020 AEST
  • Team Kalkine
Orocobre Records 32 per cent Plunge in Quarterly Revenue, While Syrah Takes a Hit of 62.5 per cent

Battery metals industry was under pressure due to the supply glut prior to the COVID-19 pandemic outbreak; however, the market challenges faced by the battery minerals players dealing in lithium, graphite, and cobalt, have been compounded by the spread of COVID-19 during the March 2020 quarter, which has cost lithium chemical producers such as Orocobre Limited (ASX:ORE) a great deal of production and sales loss amidst halted demand across the industry due to restrictions imposed by various Federal and State Governments, worldwide.

While the Australian mining players were dealing with the supply glut and were managing the supply gut via production cut and cost-saving, the outbreak of the novel coronavirus has brought the world to a standstill, which has impacted demand for battery minerals as well, leading to a decline in the quarterly revenue of some of the industry veterans such as Orocobre and Syrah Resources Limited (ASX:SYR).

Also Read: Spodumene Pullback- How are the Key Australian Players Positioned?

ASX-Listed Battery Minerals Players Reporting March 2020 Figures and Facts

Revenue and sales went down by 32 and 23 per cent, respectively Against December 2019 Quarter

Orocobre reported revenue of $12.1 million for the period, down by 32 per cent against the previous quarter and by 64 per cent against the previous corresponding period.

ORE reported a quarterly production of 2,732 tonnes for the period ended 31 March 2020, down by 24 per cent against the previous quarter and 11 per cent against the previous corresponding quarter (or pcp) in 2019.

Not just the production, the sales volumes also took a hit of 23 per cent against the previous quarter to stand at 2,518 tonnes, which also remained down by 29 per cent against pcp.

The Company realised an average price of USD 4,810 per tonne during the period, down by 11 per cent against the previous quarter; however, the cost of sales declined by 3 per cent as well to stand at USD 3,972 per tonne.

The snippet of the Company’s March performance is as below:

 

   Source: Company’s Report

                                                        Source: Company’s Report

 

ORE also suggested that during the period, the Olaroz Lithium Facility was temporarily suspended due to Argentine government COVID-19 quarantine restrictions, which coupled with planned maintenance caused the explorer and downstream processor 21 days of lost production.

To Know More, Do Read: How are the ASX Listed Lithium Stocks Placed Amidst the COVID 19 Tsunami?

Development at the Olaroz Lithium Facility and Naraha Lithium Hydroxide Plant Derail Slightly

The Company also suggested that market conditions and product pricing remained challenging, but despite that ORE managed to end the period at positive operational cash flow.

Over the growth counter, ORE mentioned that the construction of Stage 2 Olaroz Lithium Facility Expansion had been completed up to ~ 35 per cent prior to the restriction imposed by the Government, which halted all site activities.

The Company also mentioned that the construction at the Naraha Lithium Hydroxide Plant had not been affected by the coronavirus outbreak, and over 50 per cent work has been completed; however, ORE anticipates the final schedule to delay by two months due to late equipment deliveries from overseas.

As on 31 March 2020, the Company held cash of USD 163 million, out of which USD 11 million and USD 29.3 million has been set aside for the debt facility of the Olaroz and Naraha Facility. ORE’s net cash (as on 31 March 2020) stood at USD 88.2 million, Including SDJ and Borax cash and project debt, which remained down by ~ 23.63 per cent against pcp.

Post ending the March 2020 quarter, Orocobre completed the acquisition of Advantage Lithium Corp.

The stock of the Company last traded at $2.160, up by 3.8 per cent against its previous close on ASX 9as on 23 April 2020, AEST: 1:18 PM).

  • Syrah Resources Limited (ASX:SYR)

While the COCVID-19 outbreak is leading to a domino effect across the global economy, the Company is confident that despite the near-term uncertainty, the underlying long term theme of decarbonisation of the transport sector via lithium-ion powered EVs would continue to gain momentum.

Balama Sales plunges by 58 per cent While Production Falls By 20 per cent

The Company produced 12,000 tonnes of graphite during the March 2020 quarter at Balama, which remained 20 per cent down against the previous quarter, while the sales and shipment for the period stood at 7,000 tonnes, down by 58 per cent against the previous quarter.

However, SYR realised a high weightage average price (CIF) of USD 478 per tonne, up by ~ 4.36 per cent against the previous quarter, but the sales revenue took a hit due to weak demand to stand at USD 3 million, down by ~ 62.5 per cent against the previous quarter.

The snippet of the Company’s March performance is as below:

 

Source: Company’s Report

Source: Company’s Report

 

The Company managed to achieve a higher weighted average price mainly due to geographic split of sales, with no sales into China during the March 2020 quarter.

Also Read: Syrah To Capitalise on The Fundamental Shift in the Graphite Market?

SYR suspended the full-year production guidance due to the operational and market uncertainty associated with the broader global impacts of the coronavirus and also suggested that production at the Balama remains temporarily suspended from 28 March 2020 due to measures imposed by the Federal and Local Mozambique Governments to contain the spread of COVID 19.

The Company also suggested that operations at Balama were suspended due to the restricted international and domestic movement of Balama workforce and to preserve cash whilst maintaining optionality to promptly restart operations as dictated by market conditions.

SYR would now continue sales from finished product inventory through the second quarter.

While the Company managed to achieve higher weighted average price by diversifying the product from China, it anticipates that the demand for fines material remains concentrated in China, which produces 100% of all anode precursor material used for the production of anode material for lithium-ion batteries.

Syrah also suggested that, albeit, the supply chain interruptions initially observed in China impacted the entire anode supply chain and negatively impacted demand for its product, the demand and supply-side shocks associated with COVID-19 would normalise over time, but the rate of the normalisation is highly uncertain in the status quo.

SYR suggested that Chinese firms committed USD 26 billion to battery value chain investments during the March 2020 quarter., proceeds of which earmarks the ongoing buildout of battery supply chains.

SYR was trading at $0.212 on ASX, up by 3.4 percent against its previous day’s close (as on 23 April 2020, AEST: 1:27 PM).

 


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