OLAROZ LITHIUM FACILITY (ORE 66.5%)
LITHIUM GROWTH PROJECTS
Orocobre and Galaxy agree to a proposed A$4B merger of equals, establishing a new force in the global lithium sector.
Merger creates the 5th largest global lithium chemicals company with a diversified production base and exciting growth platform, with potential to unlock significant synergies and realise value to be shared by all shareholders.
Orocobre Limited (ASX: ORE, TSX: ORL) (”Orocobre" or ”the Company") advises that following a successful sales campaign and strong market demand for Olaroz lithium carbonate during the March 2021 quarter, sales were 3,032 tonnes at US$5,853/tonne FOB, with pricing up more than 50% on the December 2020 quarter. Lithium prices received by Olaroz are now up nearly 90% in the last six months.
Orocobre also advises that prices for the June 2021 quarter are expected to be approximately US$7,400/tonne FOB, subject to shipping schedules. This pricing will be the highest pricing received since June 2019 and is expected to result in H2 FY21 pricing being approximately 20% higher than prior guidance.
Production – down 9% on previous corresponding period (PcP) to 6,079 tonnes due to COVID-19 restrictions and market conditions.
Quality – reduced unplanned maintenance and faster repair times, higher brine concentration, better plant yield and lithium recovery. Kaizen and Toyota Production System implementation underway. Significant improvement in process stability and product consistency.
Sales – 7,738 tonnes (up 21% PcP) with revenue of US$27.0 million. Average sales price of US$3,492/tonne FOB1, down 22% half on half (HoH).
Half year cash cost of sales at US$3,777/t2, down 19% on PcP with a focus on cost reduction and improved operational efficiency.
Margin of US$-285/t for H1 FY21 with EBITDAIX loss of US$3.9 million.
H2 FY21 sales prices are expected to increase >50% to approximately US$5,500/tonne with improving market conditions.
Group loss of US$29.1 million (underlying loss of US$27.3 million) and EBITDAIX loss of US$6.3 million.
Total Group cash of US$262.3 million (corporate + reserved+ 100% SDJ), net proportional group cash of US$102.6 million (excluding shareholders loans).
Borax TRIFR reduced to 5.2 in H1 FY21 from 6.8 in H1 FY20.
We continue to develop ESG practices with new carbon emission and diversity projects.
Naraha and Olaroz Stage 2 are progressing within COVID-19 restrictions
Orocobre Limited advises that following an earthquake late Saturday (13 February 2021, JST) off the coast of Fukushima Prefecture, north east Japan, there are no injuries to employees at the Naraha Lithium Hydroxide Plant. An initial inspection of the plant with the construction contractor, Veolia Jenets on the morning of 14 February found some minor damage to the site office but did not find any visible defects to plant equipment. Additionally, there is no damage to site infrastructure services. A further inspection will be undertaken on 15 February to confirm the initial observations and assure the safety of the site prior to the recommencement of construction work.
Olaroz Lithium Facility (Olaroz) operations returned to being Gross Cash Margin positive with record sales volume during the quarter while costs declined to near all-time lows. Quarterly production volumes were the third highest since operations commenced. Low costs and strong, stable production mean the business is well positioned to participate in the improving lithium market. Operations continued under the established Bio-Security Protocol with limits on the number of personnel on site for both production and expansion works.
OLAROZ LITHIUM FACILITY (ORE 66.5%)
Operational activities continue to focus on the health and well-being of our staff, contractors and communities while maintaining production at an appropriate level to meet customer demand.
Production for the quarter of 2,352 tonnes was down 6% on the quarter on quarter (QoQ) due to a three week scheduled shutdown. Plant stability and operating practices continue to improve as evidenced by brine grades that are higher than at the same period in previous years and higher recoveries.
Sales volume for the quarter was up 112% quarter on quarter to 3,393 tonnes, while sales revenue was up 68% QoQ to US$10.5 million following the sale of excess inventory. The realised average price achieved was US$3,102/tonne on a free on board basis (FOB). Sales volumes were approximately 22% battery grade lithium carbonate and the remainder primary grade lithium carbonate.
Cash costs for the quarter (on a cost of goods sold basis) were US$3,974/tonne, excluding the export tax of US$70/tonne but including all additional costs incurred as a result of COVID-19 restrictions and operating practices.
During the quarter Orocobre entered into a non-binding MOU with Prime Planet Energy and Solutions (PPES), a joint venture between Toyota (51%) and Panasonic (49%) specialising in the production of automotive battery cells, for the long-term supply of product culminating in 30kt of lithium carbonate equivalent (LCE) in CY25. Discussions are now underway to finalise the detailed terms of the agreement.
Lithium prices appear to have bottomed and realised Q2 FY21 prices are expected to be higher than Q1
LITHIUM GROWTH PROJECTS
Construction work on Stage 2 continued to be impacted during the quarter by COVID-19 restrictions. Construction has progressed to approximately 44% completion. Plans are in place to increase the accommodation available for expansion personnel so that appropriate social distancing can be maintained as the workforce increases. Stage 2 is expected to commence production in FY23, ramping up to full capacity of 25,000 tonnes per annum (ktpa) of industrial grade lithium carbonate by FY26.
Naraha Lithium Hydroxide Plant construction has continued throughout the period. However, delayed equipment deliveries from overseas will result in commissioning commencing in H2 CY21. Construction has achieved >80% completion
Orocobre Limited is pleased to announce the successful completion of its Share Purchase Plan (SPP), which closed at 5.00pm (AEST) on 22 September 2020. The SPP was open to 10,742 Eligible Shareholders. The Company received applications from 2,469 Eligible Shareholders representing a participation rate of 23% and an average application amount of approximately AS17,000.
A$126 million raised through an oversubscribed institutional placement. Demonstrates strong endorsement for Orocobre's enhanced financial flexibility and future outlook. Non-underwritten Share Purchase Plan to raise up to A$30 million (SPP) will open to existing eligible shareholders in Australia and New Zealand shortly.
Promising FY20 full year result despite significant pricing and COVID 19 impacts. Olaroz Stage 2 to deliver a significant reduction in cash costs and step up in volumes. Orocobre has entered into a non-binding MOU with PPES, a joint venture between Toyota Motor Corporation (Toyota) and Panasonic Corporation (Panasonic), for a sizeable long-term contract which would, if a binding agreement is executed on the anticipated terms, minimise Orocobre's exposure to spot prices and significantly improve the customer mix. The Equity Raising delivers financial flexibility to support Stage 1 ramp up and Stage 2 development through a range of operating and pricing environments, as well as capital for future growth initiatives.
Orocobre Limited advises that a Memorandum of Understanding has been signed by Orocobre, Sales de Jujuy (SDJ, the operator of the Olaroz lithium facility), Toyota Tsusho Corporation (TTC), Toyotsu Lithium Corporation (TLC, the TTC subsidiary in Naraha joint venture) and Prime Planet and Energy Solutions Inc. (PPES) for the supply of battery grade lithium hydroxide and lithium carbonate for use in PPES battery production supply chain.
At the date of this report no cases of COVID-19 have been recorded at Olaroz, Borax and corporate offices or sites. The Olaroz Lithium Facility (Olaroz) recommenced production on 9 April following a closure due to COVID-19 restrictions in late March. Despite lower operating rates, partly due to our Bio-security Protocol, cash cost of sales was the lowest achieved for three years at US$3,920/tonne. Market conditions and product pricing continued to be challenging with significantly reduced sales volume of 1,601 tonnes at a price of US$3,913/tonne. Work continues at the Naraha Lithium Hydroxide Plant (Naraha) while site operations at the Olaroz Stage 2 Expansion continue at a reduced pace clue to COVID-19 restrictions.
Orocobre Limited advises that following a review of completed and planned sales for the June quarter the total sales volume is expected to be approximately 1,600 tonnes of lithium carbonate. Product pricing is expected to be approximately US$4,015/tonne FOB.