Brisbane, Australia (FSCwire) - Orocobre Limited (ASX:ORE) (TSX:ORL) (OTCMKTS:OROCF) is pleased to
provide the company's latest Quarterly Activities Report.
HIGHLIGHTS
OLAROZ LITHIUM FACILITY (ORE 66.5%)
- Sales revenue of US$33.5 million; representing the first full quarter of commercial production and up 45% quarter on
quarter
- Average FOB price received for the September quarter was up 24% from May/June 2016 to US$9,334/tonne. Cash operating costs were
US$3,579/tonne resulting in strong operating margins
- September quarter production was 3,013 tonnes* with record monthly tonnage of 1,125 tonnes achieved in September
- Sales de Jujuy S.A. self-funded a US$12.8 million principal and interest payment for the Mizuho project loan during the
quarter
- The scoping study for the Olaroz Stage 2 expansion of 17,500 to 25,000 tonnes per annum lithium carbonate equivalent (LCE) is
complete, results are being compiled and will be released shortly
BORAX ARGENTINA
- Sales volume in the quarter was 11,940 tonnes, representing a 29% increase quarter on quarter and a 47% increase on the
corresponding quarter last year, excluding sales of low value tincal ore
- Unaudited Earnings before Interest Tax Depreciation Amortisation and Forex ( ''EBITDAX'') breakeven, negatively affected by the
commissioning of the modifications at the boric acid plant in Campo Quijano
- Tincalayu borax plant expansion and modifications completed in the previous quarter were fully commissioned and ramping up in
production rate during the quarter. The changes at the Campo Quijano boric acid plant were completed in July and undergoing
commissioning during the quarter. These modifications are expected to result in improved unit costs at both facilities
- Expansion studies to achieve increased production at Tincalayu commenced in the June quarter with a scope of 100-120,000 tonnes
per annum borax decahydrate equivalent production and development of a circa 25,000 tonne integrated boric acid plant
CORPORATE
- As the Company now generates signficiant revenue and cash flow from production activities, the ASX has re-classified it a
production company and as such it will no longer lodge an Appendix 5B. The company will disclose key financial performance
indicators in this Quarterly Operations Report
- Orocobre has a strong cash position of US$32.2 million from a corporate perspective excluding restricted cash on hand (i.e.
cash committed to Standby Letters of Credit (SBLC) at the end of the quarter)
- The Orocobre share price has been negatively impacted by a significant increase in short selling activity since late August,
which now exceeds historical levels at more than 7% of issued capital. A significant portion of this has been bought by the
Company's Top 20 shareholders
OLAROZ LITHIUM FACILITY
The Olaroz Lithium Facility is Orocobre’s flagship project located in the Jujuy province of Argentina. Together with partners,
Toyota Tsusho Corporation (TTC) and Jujuy Energia y Mineria Sociedad del Estado (JEMSE), Orocobre is now operating the first
large scale lithium brine plant to be commissioned in approximately 20 years.
The Olaroz Lithium Facility joint venture is operated through Argentine subsidiary Sales de Jujuy SA (SDJ SA). The effective
equity interests are: Orocobre 66.5%, TTC 25.0% and JEMSE 8.5%.
PRODUCTION, SALES AND GUIDANCE
Sales revenue for the September quarter was US$33.5 million representing the first full quarter of commercial production and
sales from the Olaroz Lithium Facility. Pro-rata sales tonnes (based off May/June) were up 17% while the average price received
was up 24%. Cash operating costs were US$3,579/tonne resulting in strong operating margins.
Strongly positive operating cash flow continued in the September quarter which allowed Sales de Jujuy S.A. to self-fund a US$12.8
million principal and interest payment for the Mizuho project loan. Positive operating cashflow is now expected to be an on-going
feature of the business.
Production in the month of September was a record 1,125 tonnes. September quarter production and operating costs were impacted by
a 10 day mechanical outage in the drying circuit during August but still remained higher than the June quarter. Production in the
December quarter is forecast between 3,500 and 4,000 tonnes.
The focus continued to be on improvements in operating practice, plant optimisation and process control. With the operation
consistently achieving good performance in the primary circuit, the focus has been the purification circuit. Following various
minor modifications, the circuit is now operating with improved control, increased residence times in reactors and good
temperature profiles through all parts of the circuit. In addition, changes to carbon dioxide injection points and diffusor
design modification have resulted in the elimination of "in process" material and the achievement of more stable operating
conditions throughout the circuit.
Production in the purification circuit is currently limited due to restricted thickener residence time post the purified product
crystallisers. Throughput will be increased in the December quarter by adding a cyclone bank to augment the thickener capacity.
The thickener is the final step in the purification circuit prior to product entering the drying circuit.
BRINE INVENTORY
At the end of the quarter, brine inventory was approximately 39,900 tonnes of lithium carbonate equivalent.
SALES ORDERS
Commercial shipments of lithium carbonate continue to be dispatched from the Olaroz Lithium Facility to Europe, Asia and the USA.
Normal production is sold as either battery, technical or industrial grade products and sold into the chemical manufacturing,
industrial and battery application sectors. Commercial dispatches of high purity product to battery market customers continued
during the quarter and additional customers will be supplied in the December quarter.
The September quarter sales price was up 24% against the June quarter to US$9,334/tonne. The customer orders fulfilled during the
quarter included a significant number of back orders that were priced at levels much lower than current contract levels and the
weighted average price achieved is of course dependent upon the mix of customer orders fulfilled during the quarter which is
influenced by a number of factors including shipping schedules. The Company maintains price guidance on an FOB1 basis for the
December quarter at approximately US$10,000/tonne. Strong market demand and supply side constraints are expected to maintain
robust market prices for lithium carbonate.
SHORT-TERM LITHIUM MARKET OUTLOOK
Contract prices increased from the June quarter to the September quarter. Following strong demand thoughout the year China's spot
prices softened slightly during the quarter but contract prices continued to strengthen including those achieved by
Orocobre.
The Chinese EV market has softened on the back of a review of the government subsidy policy which is due to be completed in the
next month. It is expected that there will be some consolidation of EV manufacturers with a resultant decrease in the total
number of EV manufacturers in China. There is some inventory build occurring at cathode manufacturers in China in anticipation of
an upturn in battery demand in Q4 2016 and into Q1 2017.
All available forward indicators of market demand remain positive including:
- Announcement of subsidy policy changes in China for electric vehicle production expected shortly
- China EV targets remain at five million vehicles by 2020 including 200,000 buses and three million EVs per annum by 2025
- On-going replacement of lead acid batteries by Li-ion batteries, even in traditional uses such as automotive SLI (starter,
lights, ignition) batteries
- Continued construction of EV gigafactories with seven plants currently being built and 12 expected by 2020
- There are more than 100 Li-ion battery manufacturers in China
- Growing demand for energy storage as evidenced with Southern California Edison committing to an 80MWh Li-ion storage system for
management of peak electricity loads
- Glocal consumer interest in EV's continues to grow - over the next two years, 25 new makes and models of electric cars have
been announced for release
- Continuing strong demand from other (non-EV) battery applications including mobile phones, laptops and tablets
- Healthy demand from traditional end-use markets
The Company's short term outlook is for increasingly tight market dynamics in lithium markets with new supply being further
delayed.
EXPANSION STUDY FOR OLAROZ
A scoping study to evaluate a potential Stage 2 expansion of 17,500 to 25,000 tonnes per annum has been submitted to the joint
venture partners for review and will be released shortly. The study assessed construction of a similar plant to the existing
Olaroz Lithium Facility. Lithium hydroxide production is also considered.
PLANS FOR CAUCHARI
Further drilling of Cauchari is planned in FY17 to define a larger resource and conduct pumping tests. The Environmental Impact
Study is being considered by Unidad De Gestión Ambiental Minera Provincial (UGAMP) in November. Cauchari is immediately south of
the Olaroz plant, with an inferred resource of 470,000 tonnes lithium carbonate equivalent, 1.6 million tonnes potassium chloride
and 122,000 tonnes boron. Cauchari has potential for incremental production to feed into the expanded facilities at Olaroz.
MOU FOR DEVELOPMENT OF LITHIUM HYDROXIDE PLANT
Orocobre continues negotiations in relation to the next stage under the MOU. For further details, please refer to the Company's
announcement "MOU for Development of Lithium Hydroxide Plant", 13 November, 2015.
BORAX ARGENTINA
Unaudited EBITDAX was breakeven and negatively affected by the commissioning of modifications at the boric acid plant. Borax
Argentina is expected to move into positive EBITDAX in the December quarter as operations achieve greater stability.
The focus this financial year (FY17) is to improve production rates and unit costs following the optimisation projects at
Tincalayu and Campo Quijano and improve efficiencies, build suitable inventory levels, improve response times, delivery
performance and reinforce Borax's value proposition as the producer integral to a customer's security of supply strategy.
OPERATIONS
A total volume of 11,940 tonnes of combined product was sold during the quarter. This is an increase of 2,666 tonnes on the
previous quarter and 3,816 tonnes on the corresponding quarter last year, on a comparable basis excluding sales of low value
tincal ore. There were no tonnes of tincal ore sold this quarter.
PRODUCTION IMPROVEMENT PROJECTS COMPLETED
The Tincalayu borax plant expansion and modifications completed in the previous quarter were fully commissioned and ramping up in
production rate during the quarter. On-going benefits of the recent works include lower unit production costs for both
decahydrate and pentahydrate and additional options to export finished product directly from Tincalayu to international markets
via Chilean ports.
Modifications of the boric acid plant at campo Quijano were completed in July and undergoing commissioning during the quarter.
Recent production rates above 30tpd have been achieved, in line with expectations.
The modifications at both Tincalayu and Camp Quijano are expected to result in improved unit costs at both facilities.
TINCALAYU EXPANSION STUDY
A study commenced in Q2 CY2016 to evaluate a potential expansion of the Tincalayu refined borates operation from its current
production capacity of 30,000 to 100-120,000 tonnes per annum and an integrated 25,000 tonne boric acid plant.
It is anticipated that the potential expansion will further enhance efficiencies in the production of refined borates at
Tincalayu and contribute to improved manufacturing unit costs. This study will consolidate the work already undertaken on a new
gas pipeline, for which permitting is underway.
It is anticipated the study will be completed early in CY2017.
MARKET CONDITIONS
Tonnes sold in the quarter are up 47% on the corresponding period last year (11,940 tonnes vs 8,124 tonnes).
Borax Argentina has also been pursuing an ongoing geographic and product diversification strategy in order to better insulate the
business from localised economic and market cycles. In addition to its traditional markets in South America, the Company now has
a geographically and market diverse range of customers.
To view the report, please visit:
http://abnnewswire.net/lnk/210Q1Z9C
About Orocobre Limited
Orocobre Limited is listed on the Australian Securities Exchange and Toronto Stock Exchange (ASX:ORE) (TSX:ORL) (OTCMKTS:OROCF),
and is building a substantial Argentinian-based industrial minerals company through the construction and operation of its
portfolio of lithium, potash and boron projects and facilities in the Puna region of northern Argentina.
The Company has built, in partnership with Toyota Tsusho Corporation and JEMSE, the first large-scale, greenfield brine based
lithium project in 20 years at the Salar de Olaroz with planned production of 17,500 tonnes per annum of low-cost battery grade
lithium carbonate.
Contact
Richard Seville
Managing Director
T: +61-7-3871-3985
M: +61-419-916-338
E: rseville@orocobre.com
David Hall
Business Development Manager
T: +61-7-3871-3985
M: +61-407-845-052
E: dhall@orocobre.com
To view this press release as a PDF file, click onto the following link:
public://news_release_pdf/orocobre10272016.pdf
Source: Orocobre Limited (TSX:ORL)
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