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In this article, we would discuss the two stocks from the Metals & Mining sector. On 24 July 2019, S&P/ASX 300 Metals & Mining (Industry) Index closed at 4,732.4, down by 36.9 points or 0.77%. Importantly, both the stocks are constituent of the S&P/ASX 300 Metals & Mining (Industry) Index.
Orocobre Limited (ASX: ORE)
Orocobre Limited is a dual-listed (on TSX and ASX) Argentinian company with business interests in Argentina-based industrial chemicals and minerals. On 24 July 2019, the company announced the Quarterly Activities for the period ending 30 June 2019.
Stage 2 Strategy (Source: Investor Presentation, May 2019)
Olaroz Lithium Facility
Production, Sales & Operational Updates
Reportedly, the company produced 3,455 tonnes down by 4% from 3,596 tonnes in the previous corresponding period, but this also depicted an increase of 12% from the previous quarter at 3,075 tonnes. Also, the March quarter was affected by the weather conditions. Besides, the company recorded the sales of 3,387 tonnes of lithium carbonate up by 4% from 3,255 tonnes in the previous corresponding period. Further, the sales were executed with a realised average price of US$8,220/tonne on FOB basis, and the total sales revenue was recorded at US$27.8 million.
As per the release, the gross cash margins excluding export tax were recorded at US$3,727/tonne or 45%, which depicts a 19% fall over the prior quarter and 37% fall over the previous corresponding period. Also, the operating costs were up by 7% to US$4,493/tonne over the prior quarter along with 18% increase over the previous corresponding period. Besides, the impact in the costs depicts the re-start of purified lithium carbonate production for the month of May. Further, the carry forward inventory from Q3 FY19 sold in Q4 FY19 added to the impact on costs along with escalated Argentine Peso based fixed costs without the benefit of devaluation realised in previous quarters.
Admittedly, the companyâs operational strategy continues to emphasise on the safety and quality, and special heed has been paid towards improving the lithium grade of brine feedstock. Also, a better lithium grade provides multiple benefits, including higher-quality and better product quality and consistency. Besides, the quality improvement projects have been underway to enhance the quality of packing as requested by clients, and plant equipment availability is also under review to decrease the plant downtime caused by unplanned maintenance.
Lithium Growth Projects
As per the release, the company had approved the Final Investment Decision (FID) for the Naraha Lithium Hydroxide Plant planned to be built in Japan with the JV partner TTC. Also, the company would hold 75% interest in the JV and operations would be run by TTC. Besides, the construction of ponds, secondary liming, roads, plant and camp upgrades had been completed for the Stage 2 Expansion of the Olaroz Lithium Facility.
Borax Argentina
Reportedly, the overall sales volume for the June quarter was 11,758 tonnes, up by 10% over the prior quarter and up by 11% over the previous corresponding quarter. Also, the total sales revenue depicted a growth of 12% over the previous quarter.
Cauchari JV & Corporate
The Cauchari Project
As per the release, the project is JV between the company and Advantage Lithium (TSV: AAL), and the company holds a 25% interest in the project. Also, the project would proceed with the Pre-Feasibility Study (PFS) and independent NI 43-101 Technical Report, and this had been arranged by AAL along with an independent resource consultant and WorleyParsons Chile S.A.
Cash Balance
Reportedly, the company had a cash balance of US$248 million as at 30 June 2019, and it also kept US$11.1 million as a guarantee for Naraha debt facility.
On 24 July 2019, OREâs stock last traded at A$2.85, up by 0.352% from the previous close. The return of the stock over the last year period, has been of -47.45%.
Kidman Resource Limited (ASX: KDR)
Kidman Resource Limited is a Metals & Mining company, based in Australia, engaged in the development of the Mt Holland Lithium Project in collaboration with Sociedad QuÃmica y Minera De Chile S.A.
Company Overview (Source: Investor Day Presentation, February 2019)
On 11 July 2019, the company reported its Quarterly activities report and cash flow reports:
Integrated Definitive Feasibility Study
As per the release, the Mt Holland Lithium Project is a JV named Covalent Lithium, and the company holds 50% interest in it . Also, an Integrated Definitive Feasibility Study is underway at the project, and it is anticipated that Covalent Lithium would deliver the draft IDFS to the JV by July 2019 for review purpose. Consistently with JV agreement, the study would be completed and approved by JV during the final quarter of 2019, and the final investment decision is expected in the first quarter of 2020.
Scheme of Arrangement
On 23 May 2019, the company entered into a Scheme Implementation Deed (SID) with Wesfarmers, which would be consequential to the 100% acquisition of Kidman Resources by Wesfarmers Limited (ASX:WES). Also, the consideration for the transaction was $1.90 per share through the Scheme of Arrangement. Besides, if the Scheme is implemented, it would value the company at ~$776 million with 47.3% premium to the closing price of $1.29 on 1 May 2019. Further, the Board of the company has concluded that the offer is in the best interest of shareholders.
Reportedly, it is expected that the Scheme Booklet would be delivered to the shareholders in early August, and the shareholder would have a vote on the Scheme by early September 2019. Also, if the scheme is approved, it is anticipated that the acquisition would be implemented by September 2019. Besides, the companyâs Directors intends to vote in favour of the transaction, and the Board has recommended shareholders to vote in favour of the transaction.
Moreover, the Scheme would be subject to the conditions precedent, including shareholder approval, an opinion by the Independent Expert accomplishing that the Scheme is in the best interest of shareholders and more.
Offtake Agreements
As per the release, the SID with Wesfarmers restricts Kidman to enter or modify any offtake agreements; however, the discussion could continue with existing offtake counterparties as required by the relevant offtake agreement. On 30 June 2019, the target date for entry to the definitive supply agreement with Mitsui passed. Also, passing of the date without a definitive supply agreement does not impact the validity of the Heads of Agreement; however, it provides a choice to terminate the Heads of Agreement upon 40 Business Daysâ notice, as of 11 June 2019 no such notice have been proceeded by any party.
Annual General Meeting
Kidman Resource held the Annual General Meeting during the quarter on 9 May 2019, and all of the resolutions put to shareholders were passed by the mandatory majorities.
Cash Flow
Consistent with an announcement on 3 July 2019, due to the change in the estimate and timing of tax payable the cash outflows for the June 2019 quarter were recorded at approximately $1.4 million. Reportedly, the cash balances by the end of the quarter stood at approximately $25.6 million.
On 24 July 2019, KDR last traded at A$1.895, flat from the previous close. Over the past one year, the stock has delivered a return of +21.47%.
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