Orocobre flags weaker lithium carbonate prices

Sydney- and Toronto-listed lithium chemicals producer Orocobre expects to achieve an average lithium carbonate sales price of around $9,000/t in the January-March quarter of its July 2018-June 2019 fiscal year, reflecting the continuing weakness in lithium prices.

The Queensland-headquartered company reported production of 6,075t of lithium carbonate at its 66.5pc-owned Olaroz facility in northern Argentina for the first half of the 2018-19 fiscal year. Sales of 5,163t achieved an average price of $12,295/t compared with $11,415/t in the previous July-December period. Prices weakened sharply in the October-December quarter.

With a gross operating margin of 65pc from a production cost of $4,251/t (excluding royalties and corporate costs), Olaroz maintained its position as one of the world's lowest costs producers of lithium chemicals.

Construction of the stage two $295mn expansion of Olaroz "is progessing well", Orocobre said in commentary accompanying its first half results. This is expected to increase production capacity by 25,000 t/yr to 42,500 t/yr of lithium carbonate with effect from the second half of 2020.

Stage two of Olaroz will produce technical-grade lithium carbonate, part of which will be utilised by the $60-70mn Naraha 10,000 t/yr lithium hydroxide plant that is being planned for establishment in Japan with $27mn of financial support from the Japanese government.

During the development of stage two, the stage one plant will progressively migrate to 100pc battery-grade lithium carbonate production.

An engineering, procurement and construction contract for the Naraha plant is expected to be awarded by the end of March. Construction is scheduled to start before the end of June, with commissioning in the second half of 2020. The project will be managed by Japan's Toyota Tsusho, which owns 25pc of Olaroz.

Orocobre expects Olaroz stage one's lithium carbonate output for the full year to 30 June to be approximately the same as the previous year's output of 12,470t.

The company reported a first-half net profit of $24mn compared with $8.2mn a year earlier. The increase was aided by a tax benefit and foreign exchange gains.