Orocobre Production Scheduled For August; First 'Green Fields' Lithium Producer In 20 Years

| About: Orocobre Ltd. (OROCF)


Project construction is approximately 85% physically complete with a total of approximately $194 million spent or committed through executed contracts on the construction project to date.

Construction is projected to be completed on budget with first production at the end of August 2014.

Orocobre is building the first large scale “green fields” lithium brine project in approximately 20 years at a capital cost of US$229.1m and will have a design capacity of.

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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