OLAROZ LITHIUM FACILITY (ORE 66.5%)1
- Production for the quarter of 2,732 tonnes was down 11% on the previous corresponding period (PCP) due to the temporary plant shut down. Brine production and pond management continued throughout the quarter. Following the introduction of a strict bio-security protocol production of lithium carbonate recommenced on
April 10 th with a minimum crew - Sales volume for the quarter was down 29% QoQ to 2,518 tonnes while sales revenue was down 32% QoQ to
US$12 .1 million. The realised average price achieved wasUS$4,810 /tonne on a free on board basis (FOB)2. March quarter product pricing was below that of the December quarter with continuing weak demand and aggressive competitor behaviour - Cash costs for the quarter (on cost of goods sold basis)3 improved to
US$3,972 /tonne, down 3% QoQ, excluding the export tax ofUS$181 /tonne for the quarter and care and maintenance costs ofUS$255 /tonne during the plant shutdown - Operations remained operating cash flow positive with gross cash margins (excluding export tax) of
US$838 /tonne, down 28% QoQ mainly due to the lower average price received, partially offset by better cost performance.
LITHIUM GROWTH PROJECTS
- Construction of the Stage 2 Olaroz Lithium Facility Expansion reached approximately 35% completion prior to the imposition of COVID-19 quarantine restrictions which halted site activities. Site works will resume once these restrictions are lifted, however completion is now expected to be delayed
- Naraha Lithium Hydroxide Plant construction has not been affected by COVID-19 to date with more than 50% of works now completed. The final schedule may be delayed by two months due to late equipment deliveries from overseas.
BORAX
- Overall sales volume for the March quarter was 10,690 tonnes, up 24% QoQ and approximately flat on PCP. Operations were temporarily stopped due to COVID-19 restrictions as previously advised; however production has now recommenced with strict bio-security protocols in place
- Sales revenue was up 14% QoQ, however the average price received was down 6% QoQ.
CORPORATE
- As at
31 March 2020 ,Orocobre corporate had available cash ofUS$163 million of whichUS$11.1 million andUS$29.3 million have been set aside as guarantees for the Naraha debt facility and Olaroz Expansion debt facility respectively. Including SDJ and Borax cash and project debt, net group cash at31 March 2020 wasUS$88.2 million , down fromUS$115.5 million at31 December 2019 , due to funding of expansion activities - Following the end of the quarter, the acquisition of
Advantage Lithium Corp. (Advantage) was completed.
OLAROZ LITHIUM FACILITY
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SAFETY
Safety is the number one priority of the Company. From early February, awareness programs were conducted with employees and contractors on signs, symptoms and recommendations to minimise risk of exposure to the COVID-19 virus and prevent contagion. International company-related travel was restricted from February, and domestic travel from March. Towards the end of the quarter, detailed bio-security plans were developed for our operations in accordance with established national regulations and best practice approaches within the industry. These will continue to be revised and adapted in response to changing regulations and examples of best practice.
An emergency committee has been established comprising both Sales de Jujuy and Borax Argentina to coordinate operations, enforce the application of a bio-security protocol and review and update it as circumstances change. This committee analyses possible scenarios in order to plan and enable the company to be ahead of the circumstances and works in close coordination with local health authorities.
One Lost Time Injury was recorded at Olaroz during the quarter involving one of the Expansion contractors. As at 31 March there were 70 days without a Lost Time Injury (LTI).
To enhance control of the contractors associated with construction activities, the Company has focused this quarter on the implementation of SICOP contractor management system. SICOP serves as a centralised control system which provides real-time visibility of contractor certifications, compliance, and performance in accordance with established standards and regulations.
In addition to the Company’s ongoing program of work with Dupont in Safety Culture and the consolidation of Intelex as the central safety management database, the Company has also been preparing for ISO re-certification audit which will be conducted in coming months. The Company also conducted a successful shutdown for plant maintenance during the quarter with no incidents recorded during the shutdown period.
OPERATIONAL UPDATE
QUALITY
In response to evolving market quality and specification requirements, Olaroz has continued with a product improvement and development program. Quality indicators remain positive with sustained gains on process stability, improved product quality and consistency.
A planned maintenance shutdown was successfully completed in February and when production resumed the processing plant quickly achieved required product specifications.
PRODUCTIVITY
Production for the March quarter was 2,732 tonnes down from 3,075 tonnes on PCP.
Operations at Olaroz ceased on
Production recommenced at Olaroz on
COSTS/MARGINS
Cash costs for the quarter (on cost of goods sold basis) improved to
A regimented financial plan continued during the quarter with the aim of reducing unit cash costs and sustaining the current competitive position as one of the world’s lowest cost, brine based lithium carbonate producers.
Metric | March quarter 2020 | December quarter 2019 | Change QoQ (%) | PCP (Mar qtr 2019) | Change PCP (%) | |||||
Production (tonnes) | 2732 | 3586 | -24 | % | 3075 | -11 | % | |||
Sales (tonnes) | 2518 | 3287 | -23 | % | 3530 | -29 | % | |||
Average price received (US$/tonne) 3 | 4810 | 5419 | -11 | % | 9451 | -49 | % | |||
Cost of sales (US$/tonne)4 | 3972 | 4109 | -3 | % | 4193 | -5 | % | |||
Revenue (US$M) | 12.1 | 17.8 | -32 | % | 33.4 | -64 | % | |||
Gross cash margin (US$/tonne) | 838 | 1310 | -36 | % | 5258 | -84 | % | |||
Gross cash margin (%) | 17 | % | 24 | % | -28 | % | 56 | % | -69 | % |
Export tax (US$/tonne) | 181 | 238 | -24 | % | 776 | -77 | % |
SALES AND COMMERCIAL
Product sales were 2,518 tonnes of lithium carbonate with an average price of
FUTURE GUIDANCE
STAGE 2 EXPANSION AT OLAROZ
PROGRESS TO DATE
As at 31 March, approximately
Extensive restrictions have been experienced in terms of personnel movement between Argentine Provinces and on-site due to bio-security measures adopted following governmental requirements. Camp capacity has been severely restricted due to social distancing measures and these issues are expected to affect activities on site until they are lifted.
A range of options continue to be pursued to both conserve capital and optimise progress, however the COVID-19 crisis will cause a delay in project completion.
NARAHA LITHIUM HYDROXIDE PLANT
PROGRESS TO DATE
The Naraha Plant, the first of its kind to be built in
Since construction commenced at the Naraha Plant there have been no LTIs recorded. The Veolia Joint Venture is undertaking weekly safety meetings and regular site safety checks, with project staff continuing to attend safety training in alignment with the project’s safety management plan.
As at 31 March, approximately
SHARED VALUE PROGRAM AND COMMUNITY
The Company’s Shared Value team has been restructured in the last quarter to ensure equal and necessary focus on three key areas:
1) Community Empowerment – providing support and liaison for community members and the Company to support greater opportunities for local employment and local supply contracts
2)
3) Community Engagement – ensuring that channels of communication remain open at all levels of the community, particularly given issues of connectivity in the region.
Within these three focus areas, Shared Value programs and initiatives will continue to be developed and delivered in alignment with the five pillars – Health, Education, Empowerment, Transparency, and Production and Natural Resources.
The Company has also initiated a Giving and Volunteering Program to further expand its support and contribution to local communities whilst also providing its employees the opportunity to directly engage and contribute to communities and causes of interest. This Program will provide additional resources to support the Shared Value team’s work in Community Empowerment, Investment and Engagement.
Towards the end of the quarter, additional focus was placed on COVID-19 response and overcoming the unique challenges that the pandemic presents for local communities.
MARKET AND SALES
The existing challenges in the lithium market were compounded by the spread of COVID-19 during the March quarter impacting operations and logistics throughout the supply chain. As the quarter progressed it became increasingly apparent that customers downstream, particularly those in
During the early stages of COVID-19 the pandemic largely appeared contained to
At the conclusion of the quarter, European and US car plants were expected to be closed for approximately two to three months with an additional one to three months required to ramp operations back to previous levels. Battery and cathode suppliers are expected to adjust operations accordingly. In addition, these markets (
Meanwhile the Chinese market has progressively restarted operations. The Government has committed to extending the EV subsidy and 10% sales incentive to 2022. However, Chinese customers have been slow to return to car dealerships and as a result, lithium chemical customers have taken a ‘wait-and-see’ approach. Given China’s economic troubles and low consumer appetite for domestic EV models hopes for the Chinese market rest heavily on further Government stimulus and continued strong sales performance from Tesla, particularly with the release of its highly anticipated Chinese-centric EV model later this year.
SAFETY
Borax recorded one LTI during the March quarter. As at 31 March, the Sijes mine had achieved 412 days without an LTI, Tincalayu had achieved 24 days without an LTI and
PRODUCTION, SALES AND OPERATIONAL UPDATE
The March quarter saw sales of 10,690 tonnes which was up 24% QoQ and approximately the same as the previous corresponding period after adjusting for low value mineral sales in March quarter 2019. Total sales revenue was up 14% QoQ, while the average price received was down 6% QoQ.
Operations were also affected by Argentine government COVID-19 quarantine restrictions with production halted until the business was declared an “essential activity”. Following the declaration, operations recommenced with some ongoing restrictions due to the bio-security measures.
COMBINED PRODUCT SALES VOLUME BY QUARTER
Previous Year Quarters | Recent Quarters | ||
10,590 | 11,758 | ||
9,407 | 12,480 | ||
10,741 | 8,614 | ||
13,0414 | 10,690 |
Business development projects continue to be advanced and most sales that were due during the period of shutdown are likely to be delivered in the June quarter. Many customers of Borax operate in essential industries such as health and agriculture and will be less affected by current COVID-19 related restrictions.
Following the end of the quarter and an annual general meeting and special meeting of
Under the terms of the Arrangement, Advantage shareholders received 0.142
The valuation of Advantage based on the exchange ratio of 0.142 shares per the transaction will trigger a non-cash impairment charge of approximately
This transaction will allow
The development of the Cauchari resource will be considered within future plans for the Olaroz Lithium Facility.
CORPORATE AND ADMINISTRATION
FINANCE
CASH BALANCE
As at
The
Including SDJ and Borax cash and project debt, net group cash at
US$ Millions | ||
ORE Corporate Cash | 122.6 | |
ORE Restricted Cash LIOH | 11.1 | |
ORE Restricted Cash Expansion | 29.3 | |
Total ORE Corporate Cash | 163.0 | |
0.3 | ||
SDJ Cash @66.5% | 17.5 | |
SDJ Restricted Cash @ 66.5% | 11.4 | |
SDJ External Debt @ 66.5% (*) | (104.0) | |
Total Proportional Net Group Cash | 88.2 |
During the quarter conditions precedent relating to the
GUIDANCE
In light of current operation conditions and uncertain future lithium demand the Company has withdrawn guidance for FY20.
INFLATION VERSUS DEVALUATION
The AR$/US$ exchange rate exchange rate depreciated by 8% during the quarter from AR$59.89/US$ at
Authorised by:
Joint Company Secretary
FOR FURTHER INFORMATION PLEASE CONTACT:
Chief Investor Relations Officer
Orocobre Limited
M: +61 418 783 701
E: abarber@orocobre.com
W: www.orocobre.com
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1 All figures 100%
2
Therefore, the Company’s reported prices are net of freight (shipping), insurance and sales commission. FOB prices are reported by the Company to provide clarity on the sales revenue that is recognized by SDJ, the joint venture company in
3 Excludes royalties, export tax, corporate costs and restructuring costs
4 Includes 2,312 tonnes of low value mineral product
Source:
2020 GlobeNewswire, Inc., source