-Focus for the near term is on spodumene production at
-
-Lithium prices may moderate in the northern winter
A newly enlarged
The near term centres on spodumene production at Mount Cattlin (
Upside risks to forecasts stem from the spot pricing backdrop converging with contract pricing, which Credit Suisse asserts is occurring more rapidly than previously anticipated. Spot prices remain well above the broker's medium-term forecasts of around
Nevertheless, Credit Suisse believes, in terms of the longer term fundamentals, there is a material gap between net asset value and the company's share price, and remains cautious about the potential for overheating in the lithium sector.
The company has also indicated lithium prices may moderate in the northern hemisphere winter, largely stemming from pressure on industrial production in
Incorporating updated realised pricing and volume guidance for
Olaroz
In the September quarter Olaroz was weak, as production was below expectations amid a higher proportion of battery grade sales mix (a positive aspect yet leading to lower volumes) along with an increase in gas prices. Macquarie points out the higher costs stem from a combination of lower volumes, the impact of the pandemic, higher gas prices and labour costs.
There was also inflationary pressures and the devaluation of the Argentine peso to contend with. The Olaroz stage 2 plant is 60% complete and production should commence in the second half of 2022.
Now Mount Cattlin is under its belt, Orocobre will leverage a strong spot market. Production guidance for 2021 has been revised up to 210-220,000t from 195-210,000t.
December quarter realised pricing guidance has been upgraded to
The strong performance at
The company may have upgraded Mount Cattlin production guidance but, as this is largely because of grade, which has been running significantly ahead of guidance, it implies a large drop in the December quarter, Morgan Stanley asserts, which should also be negative for costs. December quarter pricing and shipments are lower than expected, because of inflation and congestion.
The main priority, Citi observes, is the expediting of Olaroz and
The broker envisages value in the growth opportunity that will benefit from the strengthening demand for electrification and associated lithium battery requirements. Nevertheless,
Credit Suisse concludes, with such emphasis on development that requires significant investment there is little possibility of a dividend in the short term.
FNArena's database has three Buy ratings and two Hold. The consensus target is
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