(Disclosure: I own Talison Lithium, and have been accumulating in Aug and Sept 2011.)
Monday, September 12, 2011
Perth, Western Australia, September 12, 2011 - Talison Lithium Limited (TSX:TLH | US:TLTHF) today announced results for the fiscal fourth quarter 2011 and fiscal year 2011.
- Construction of the Stage 2 expansion of the Greenbushes Lithium Operations continued during the quarter on time and on budget.
- During the quarter, Talison announced updated lithium mineral resources and reserves for the Greenbushes Lithium Operations as of March 31, 2011. Total lithium proven and probable mineral reserves increased by 157% (measured on the basis of total tonnes of contained lithium carbonate equivalent (“LCE”) and mine life of the Greenbushes Lithium Operation was extended to 22 years.
- The first drill program at two of the seven salars that comprise the Salares 7 Project in Chile was completed during the quarter with highly encouraging results.
- Price increases of up to 25% were announced by two of the three other major lithium producers late in the fourth quarter. Talison believes the price increases are indicative of a tightening in lithium supply while global demand remains strong.
- Production and sales volumes for the fiscal year 2011 of 342,097 tonnes and 339,501 tonnes of lithium concentrates, respectively (approximately 51,000 tonnes LCE and 50,000 tonnes LCE, respectively), representing a 30% and 32% increase year over year.
- Operating cost per tonne reduced by 12% for fiscal year 2011 as a result of an increase in plant yields.
Financial Highlights for the Fiscal Year 2011
- Earnings before interest, income tax, and depreciation and amortization (“EBITDA”) of A$24.1 million on revenues of A$109.5 million, representing a 29% and a 35% increase respectively, over the 2010 fiscal year.
- Operating cashflow of A$22.3 million, an increase of A$15.4 million year over year.
- Net profit after tax of A$22.9 million.
- Basic earnings per share was A$0.257.
- Cash and cash equivalents as at June 30, 2011 of A$102.6 million.
Fourth Quarter Financial Results
Talison generated revenue of A$26.4 million in the quarter. In US$ terms, sales revenue was 8% higher than Q4 fiscal year 2010 however, in A$ terms sales revenue decreased 11% q/q as a result of the adverse impact of a 21% increase in the value of the A$ against the US$ between the two periods.
The Company realized an average sales price (“ASP”) per tonne of lithium concentrate of US$302, above of Q4 fiscal year 2010 ASP of US$298.
Talison sold 92,416 tonnes of lithium concentrate during the quarter, a 5% increase over Q4 fiscal year 2010. Production volume increased 25% q/q as the Company realized the full benefits of the completion of its Stage 1 capacity expansion of the Greenbushes Lithium Operations.
Cash cost of goods sold was A$17.0 million, down 18% qq. This figure equates to a cash gross margin of 36%. Cash cost of goods sold decreased as Talison realized economies of scale as it increased production capacity. Furthermore, the Company implemented processing efficiency initiatives that resulted in a 15% improvement in yield.
EBITDA was A$5.8 million, steady at 22% of revenue. EBITDA declined 8% q/q as a result of a 21% increase in the value of the A$ against the US$, offset by an increase in sales volumes and a reduction in operating costs.
Fiscal 2011 Financial Results
Talison generated revenue of A$109.5 million for the year, an increase of 35% compared to fiscal year 2010. The revenue growth reflects both volume growth and better realized pricing. The Company sold 339,501 tonnes of lithium concentrate, a 32% y/y increase. Volume grew as Talison realized the benefits of the completion of its Stage 1 capacity expansion. The Company realized an average sales price per tonne of US$308, a 10% increase from the ASP of US$281 in fiscal year 2010. Revenue was impacted negatively by the 12% increase in the value of the A$ against the US$.
Cash cost of goods sold was A$70.6 million, up 22% as a result of the increase in sales volume and 12% reduction in operating costs per tonne lithium concentrate sold. This figure equates to a cash gross margin of 36%, a significant improvement over the cash gross margin of 29% realized in 2010. Gross margin improved due to economies of scale resulting from the ramp up of the Stage 1 capacity expansion. Additionally, processing efficiency initiatives resulted in a 10% improvement in yield.
EBITDA was A$24.1 million, steady at 22% of revenue. EBITDA expanded 29% y/y, due to both sales growth and improved gross margin, offset by an increase in the A$/US$ exchange rate and non-recurring reorganization costs.
Fourth Quarter Operations
During the quarter, Talison made significant progress in a number of key operational areas. The Company continued expansion of the production facilities at the Greenbushes Lithium Operations, advanced efforts on its mineral conversion plant, and reported positive exploratory results at the Salares 7 project in Chile. The Company also reported updated lithium mineral reserves at the Greenbushes Lithium Operations.
Talison is doubling its capacity to produce lithium concentrate to 740,000 tonnes per year with the Stage 2 expansion of the Greenbushes Lithium Operations. Talison will ultimately spend A$65 to A$70 million to complete this project, which should commence operations in the fiscal fourth quarter 2012. Construction remains on budget and on time. During the quarter, bulk earthworks were completed, the majority of foundations laid, and construction progressed on the final product stockpile area.
Talison is aggressively pursuing its proposed plant to convert lithium minerals into lithium carbonate (“Minerals Conversion Plant”). Preliminary engineering and location studies for the proposed Minerals Conversion Plant commenced, with the location study evaluating several Western Australian locations, including at Greenbushes, and one overseas location. External engineering and environmental consultants were appointed to contribute to the preliminary studies. Discussions with potential customers regarding future lithium carbonate requirements are also underway. Talison is receiving considerable encouragement to expedite the development of the Minerals Conversion Plant.
During the quarter, Talison completed the first drill program at two of the seven salars that comprise the Salares 7 Project in Chile. The program consisted of initial shallow reconnaissance drilling at Salar de la Isla and Salar de Las Parinas. Initial results are highly encouraging.
Brine analyses at Salar de la Isla indicate:
- Lithium of up to 1,080 milligrams per liter (“mg/l”) lithium, with an average of 863 mg/l; and
- Potassium of up to 9,830 mg/l, with an average of 7,979 mg/l
Brine analyses at Salar de Las Parinas indicate:
- Lithium of up to 480 mg/l, with an average of 331 mg/l; and
- Potassium of up to 8,210 mg/l, with an average of 5,650 mg/l
During the quarter, Talison announced updated lithium mineral resources and reserves for the Greenbushes Lithium Operations as of March 31, 2011. Total lithium proven and probable mineral reserves increased by 157% (measured on the basis of total tonnes of contained LCE) and mine life of the Greenbushes Lithium Operation was extended to 22 years. Talison believes there will be further opportunities to increase lithium mineral reserves and extend mine life at the Greenbushes Lithium Operations in the future.
Fiscal 2012 Outlook
Talison expects production of lithium concentrate in fiscal Q1 2012 to be in-line with that of fiscal Q4 2011. The Company expects sales of lithium concentrate to match production. Price increases of up to 25% were announced by two other major lithium producers late in our fiscal fourth quarter. Talison secured price increases for two shipments in fiscal Q1 2012 and believes the price increases are indicative of a tightening in lithium supply while global demand remains strong.
During fiscal 2012, Talison expects demand to remain strong for both technical-grade and chemical-grade lithium concentrate, and that it will produce and sell at capacity. Capacity is expected to remain constrained until commissioning of the Stage 2 expansion in fiscal Q4 2012. Because the commissioning should occur late in the year, the additional capacity will not impact sales until fiscal 2013. However, the full year of contribution from the Stage 1 Expansion, combined with anticipated process improvements, should enable full year 2012 sales to equate to fiscal Q4 2011 sales on an annualized basis.
Talison will host a conference call to discuss the financial results on Monday, September 12, 2011 at 9:00 a.m. EDT. The call is being webcast by Thomson Reuters and can be accessed at www.earnings.com or at Talison’s website, talisonlithium.com.
Teleconference call details are as follows:
North America: +1 (800) 295-4740
International: +1 (617) 614-3925
Participant Code: 56641749
Chairperson: Peter Oliver, Chief Executive Officer and Managing Director
Available from: September 12, 2011, 12:30 PM EST
Available to: September 20, 2011
Dial In: +1 (888) 286-8010
International: +1 (617) 801-6888
- Talison sees big lithium demand, higher prices through 2012 (retirefunds.blogspot.com)
- Talison Lithium to Report Fiscal Fourth Quarter and Full Year 2011 Financial Results on September 12 (retirefunds.blogspot.com)
- Talison Lithium Announces Preliminary Fiscal Year 2011 Production Results (retirefunds.blogspot.com)
- Rodinia Lithium getting on Analysts radar screens! (retirefunds.blogspot.com)
- U.S. China News 2011.07.21 (americachina.wordpress.com)