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OROCOBRE LIMITED

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Orocobre : March 2021 Quarterly Report - March 2021 Quarterly Report.pdf

05/24/2021 | 02:03am EDT

Quarterly Report of Operations for the Period Ended 31 March 2021

MARCH QUARTER 2021 KEY HIGHLIGHTS1

Olaroz Lithium Facility (Olaroz) operations increased the Gross Cash Margin more than $1,800/tonne with the sales price up more than 50%. Costs remained near all-time lows despite much a greater proportion of sales being battery grade material which has higher production costs. Market conditions have improved materially and this will be reflected in higher June quarter product pricing. Operations continued under the established Bio-Security Protocol.

OLAROZ LITHIUM FACILITY (ORE 66.5%)2

  • Activities continue to focus on the health and well-being of our staff, contractors and communities while maintaining production and expansion works with no COVID-19 related stoppages during the period
  • Production of 3,232 tonnes was the highest achieved in a March quarter and up 18% on the previous corresponding period (PCP). It was down 13% quarter on quarter (QoQ), due mainly to a nine day planned maintenance program undertaken during February and an increase in the proportion of battery grade product
  • Sales volume of 3,032 tonnes was up 18% on PCP, but down 30% QoQ after record sales to clear inventory in the December quarter
  • Sales revenue was up 7% QoQ to US$17.7 million with the realised average price achieved up 54% to US$5,853/tonne on a free onboard basis (FOB)3 with stronger lithium market conditions. Prices have now increased by nearly 90% over the last six months
  • Cash costs (on a cost of goods sold basis)4 were down 3% to US$3,867/tonne on PCP excluding the export tax of
    US$210/tonne. Importantly, costs were only up 7% QoQ despite the proportion of battery grade sales increasing from 34% to 47% QoQ
  • Gross cash margin was up materially to US$1,986/t, an improvement of US$1,812/t on the December quarter with better pricing
  • An agreement has been reached with Prime Planet Energy and Solutions (PPES), the automotive battery cell manufacturing joint venture between Toyota (51%) and Panasonic (49%) for supply of battery grade lithium carbonate during Japanese fiscal year 21/22 (JFY21/22). Future annual discussions will determine details for subsequent years leading to supply of 30,000 tonne per annum (ktpa) of lithium carbonate equivalent (LCE) by CY25. Orocobre has commenced dispatching product from Olaroz to a bonded warehouse in Japan in preparation for the first delivery of battery grade lithium carbonate to PPES.
  • Lithium prices continue to recover and Orocobre price guidance has now been raised with Q4 FY21 prices expected to be approximately US$7,400/tonne (FOB)3. Budgeted FY22 production is fully contracted and subject to variable pricing related to benchmarks that will benefit from the expected continued improvement in market conditions

LITHIUM GROWTH PROJECTS

  • During the March quarter work at Olaroz Stage 2 continued with strong adherence to the COVID-19bio-security protocol. At the end of March, 70% of contracts had been awarded and a further 8% were at award recommendation stage. Additional accommodation facilities were completed in the quarter and more will become available in the June quarter
  • Stage 2 is expected to be complete in H1 CY22 and to commence production the following half. Production will ramp up over two years to full capacity of 25ktpa of primary grade lithium carbonate by H2 CY24
  • Naraha Lithium Hydroxide Plant construction has continued throughout the period and is now approximately 94% complete. Commissioning will be delayed until Q1 CY22 due to COVID-19 related delays of travel to site by international technicians

1 All figures presented in this report are unaudited

2 All figures 100% Olaroz Project basis

3 Orocobre report price as "FOB" (Free On Board) which excludes insurance and freight charges included in "CIF" (Cost, Insurance, Freight) pricing. 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 Argentina

4 Excludes royalties, export tax and corporate costs

2

  • A scoping study into a further expansion at Olaroz (Stage 3) commenced during the March quarter. The study will investigate options for additional production of 25-50ktpa from Olaroz, Cauchari or a combination of both, leveraging existing Stage 1 and 2 infrastructure
  • Discussions continue with Toyota Tsusho Corporation (TTC) regarding an expansion of lithium hydroxide production to meet forecast growth in demand

BORAX ARGENTINA

  • Overall sales volume for the December quarter was 10,282 tonnes, down 3% QoQ and 4% on PCP
  • Sales revenue was up 5% QoQ due to higher average prices that were up 8% QoQ with strong customer demand

CORPORATE

  • At 31 March 2021, Orocobre corporate had available cash of ~US$241.6 million of which US$11.1 million and US$85.5 million have been set aside as pre-completion guarantees for the Naraha debt facility and Olaroz Expansion debt facility respectively
  • Including SDJ and Borax cash and project debt, net group cash at 31 March 2021 was US$97.7 million, down from US$119.8 million at 31 December 2020

OLAROZ LITHIUM FACILITY

Click here for more information on Olaroz

COVID-19

During the first quarter of CY21 the epidemiological situation in Argentina was under control, with low infections in our areas of operation. The team is planning additional preventive actions to manage any impact from an expected second wave across the country. As vaccination for all employees is not yet an option, our first and most effective barrier remains a strong Biosecurity Protocol.

Daily monitoring of the workforce health continues throughout 14-21 day rosters that apply to all personnel and include those employees who would normally reside in local communities. Since July 2020, the Company medical service has performed more than 9,500 COVID-19 tests (Serological and PCR). At this point, approximately 35% of our employees have had the disease and have generated high levels of antibodies.

Additional accommodation facilities are being installed to enable the growing construction workforce to operate within the COVID-19bio-security protocol.

SAFETY

Health and safety remains a key priority for the Company. One Lost Time Injury (LTI) was recorded with a contractor at Olaroz on February 27th after 446 days without an LTI in both the operations and the expansion project. The worker involved was provided immediate medical assistance and is now recovering.

In March the ISO 14001 & 9001 & 18001 audit was performed. No major findings were reported and recertification was granted. A new work permit system and hazard analysis tool will be implemented in the next several weeks. The Dupont programs continue to enhance our safety culture and remain a key priority. Orocobre is consolidating all key leading and lagging indicators following the ACSI Future Health and Safety reporting.

3

OPERATIONAL UPDATE

QUALITY

Brine concentration remains well above prior years supporting excellent plant stability and reliability. The continuing high process capability ratio (CpK) demonstrates the ongoing ability of Olaroz to produce lithium carbonate well within specification limits.

Product quality continues to improve with reduced magnetic particles and increased product consistency.

Improving brine concentration

9000

mg/l-

8500

8000

Concentration

7500

7000

6500

6000

5500

Lithium

5000

4500

4000

PRODUCTION

1

2

3

4

5

6

7

8

9

10

11

12

Month (CY)

2018

2019

2020

2021

Production for the March quarter was 3,232 tonnes, up 18% from 2,732 tonnes in the PCP with 55% of production being battery grade lithium carbonate. Brine concentration remains at higher levels than in recent years resulting in high daily production rates, higher plant recovery and continued low costs. A nine day plant shutdown was undertaken in February for planned maintenance.

4

SALES AND COMMERCIAL

Product sales were 3,032 tonnes of lithium carbonate up 20% on PCP but down 30% QoQ after a strong December quarter. Total sales revenue was up 7% QoQ to US$17.7 million and up 46% on PCP. The average price received was up 54% QoQ to US$5,853/tonne on an FOB3 basis and up 22% on PCP with stronger pricing relative to a year ago.

Approximately half the sales in the March quarter reflect contracts that were agreed in late November and early December prior to significant movement in lithium prices.

More than 50% of forecast sales for the June 2021 quarter are expected to be allocated to long term battery grade contracts as Olaroz commences delivering product to PPES. Such percentage of battery grade product sales is expected to increase into FY22.

Several customers have recently expressed an interest in increasing their volume offtake allocation for FY22 as they struggle to secure volumes with other vendors suggesting that the market is now in a deficit position. Budgeted production at Olaroz for FY22 is fully sold and additional volumes will only become available when Olaroz Stage 2 commences production in the second half of CY22.

The estimated average price for the June 2021 quarter is expected to be approximately US$7,400/tonne FOB3, subject to shipping schedules.

PPES MOU

An agreement has been reached with Prime Planet Energy and Solutions (PPES), the automotive battery cell manufacturing joint venture between Toyota (51%) and Panasonic (49%) for supply of battery grade lithium carbonate during Japanese fiscal year 21/22 (JFY21/22). Future annual discussions will determine details for subsequent years leading to supply of 30,000 tonne per annum (tpa) of lithium carbonate equivalent (LCE) by CY25. Orocobre has commenced dispatching product from Olaroz to a bonded warehouse in Japan in preparation for the first delivery of battery grade lithium carbonate to PPES.

COSTS/MARGINS

Cash cost of goods sold for the quarter (including COVID-19 related costs) decreased by 3% on PCP remaining near all-time lows at US$3,867/tonne4. This excludes export duties for the quarter of US$210/tonne. Importantly, costs increased by only 7% QoQ, while the proportion of battery grade sales increased from 34% to 47% QoQ.

Total cost of sales has been maintained at low levels demonstrating the significant focus and reduction of fixed costs within the operating business. Lower reagent usage due to improved process efficiency and an increase in the export incentive refund with higher product prices have also contributed to the strong cost performance.

Metric

March

Dec

Change QoQ

PCP

Change PCP

quarter 2021

quarter 2020

(%)

(Mar qtr 2020)

(%)

Production (tonnes)

3232

3727

-13%

2732

18%

Sales (tonnes)

3032

4345

-30%

2518

20%

Average price received (US$/tonne) 3

5853

3797

54%

4810

22%

Cost of sales (US$/tonne)4

3867

3623

7%

3972

-3%

Revenue (US$M)

17.7

16.5

7%

12.1

46%

Gross cash margin (US$/tonne)

1986

174

1041%

838

137%

Gross cash margin (%)

34%

5%

640%

17%

95%

Export tax (US$/tonne)

210

85

147%

181

16%

Gross cash margins for the quarter returned to being strongly positive at US$1986/tonne, this is expected to further improve with better pricing in Q4 FY21.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Orocobre Limited published this content on 24 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 May 2021 06:01:59 UTC.


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