Orocobre Limited (OTCPK:OROCF) is an Australian-based industrial minerals company that has established a presence in the Puna region of northern Argentina. Orocobre is presently constructing and operating a portfolio of lithium, potash, and boron projects and facilities, with a core focus on the development of its flagship Salar de Olaroz lithium property. Salar de Olaroz is expected to enter production in August 2014 producing approximately 17,500 tonnes of low-cost, battery-grade lithium carbonate annually. The lithium carbonate produced at the Olaroz property is expected to end up in lithium-ion batteries that will power next-generation automobile.
According to a recently issued company press release the project is on schedule and budget. Here are the highlights of the construction update:
-The construction of the project continues to proceed on time and within budget and
- A total of approximately $194m has been spent or committed via executed contracts in the construction project with physical construction at approximately 85% complete.
- The commissioning of the liming plant which allowed the removal of magnesium from the brine to commence as brine is transferred from pond 4B to 4A.
-The gas pipeline was completed and is awaiting the branch line connection by Gas Atacama which has now been completed.
-Replacement transfer pumps in the southern borefield are due to be installed in May which will allow the steady state production pumping rate of approximately 180l/s to be ramped up to a peak rate of approximately 220l/s for pond filling purposes in May.
-Construction works continue on the lithium processing plant, finished goods warehouse and the soda ash warehouse.
Construction on the US $229 million project began in late November 2012, with initial battery-grade lithium carbonate production scheduled to begin in 2014. The company has been issuing regular construction updates, and on April 9, 2014, reported that 85% of construction was finished, with the lithium carbonate plant being the main outstanding work area to be completed. The project is expected to produce strong post ramp-up EBITA margins of an estimated $4,000/t Lithium Carbonate Equivalent (LCE), with operating costs in the $2,000/t LCE range, excluding any potash credits, versus LCE expected pricing of around $5,500-6,000/t. The project is expected to have initial annual production of 17,500 tonnes of LCE.
In 2012, Toyota Tsusho Corporation (OTC:TYHOF) entered a definitive shareholders' agreement with Orocobre on the Olaroz Project (Seeking Alpha: Toyota's Lithium-Based Future), which gave Toyota Tsusho a 25% interest. Toyota Tsusho, which is one of Japan's leading global trading houses, is 22% owned by Toyota Motor Corporation (NYSE:TM) and 11% owned by Toyota Industries (OTCPK:TYIDY).
Shares in Orocobre are currently trading in a tight range between $1.90-$2.30 /share which is significantly higher than the 52 week low of $1.25 / share. Based on a 132.04 million shares outstanding Orocobre has a market capitalization of $287 million. Considering the lack of activity in the company's share price this could be an indication that the investment community is in a wait and hold pattern. This is generally dubbed as the calm before the storm.
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