Published: Friday, 06 February 2015 on indmin.com
Orocobre is at the last stage of its qualifying process and it is hoping that within a few months it can begin commercial production and become a major global lithium supplier. It says that last year’s fears about lithium oversupply have not come to fruition because it is one of the few juniors to deliver results.
ASX and TSX-listed Orocobre Ltd. has said that it will be able to be a profitable player in the lithium market, dismissing fears expressed by established companies that newcomers like itself will saturate the market.
James Calaway, Orocobre’s North American chairman, told IM that, "we have a fairly robust growth in demand across the world."
"There is a little bit of expansion going on in China but as for the rest of the world, there is really no material increase," Calaway added.
Calaway says that when lithium prices were being negotiated for 2014 there was an impression amongst end-users that the lithium market would be oversupplied. He said that this led to customers "feeling muscular" when in negotiations but Calaway feels this has changed now.
"End users are more concerned with securing supply rather than price," Calaway explained.
Companies like Sociedad Química y Minera de Chile (SQM) has said it is worried about new suppliers disrupting lithium prices and saturating the market.
"What we see is a stable situation in the sense of volumes and in the side of SQM we see a strong market growing," Patricio Contesse, CEO of SQM, said during a conference call for its Q3 2014 results.
"[There have been announcements] of newcomers this year that have not been successful given they are in the equivalent of the Chapter 11 in Canada," Contesse added, referring to RB Energy, which halted all operations at its Quebec lithium project at the beginning of October 2014 and temporarily dismissed staff after it failed to secure the funding required to maintain operations.
$39m in new investment
Yesterday, Orocobre announced that it has raised approximately A$50m ($39m*) through an A$40m placement to domestic and international investors and a $10m underwritten share purchase plan.
Orocobre outlined that A$28m of the proceeds will fund the operations of its Olaroz lithium plant in Argentina, which was ramped up to commercial production within the last week.
"We are very pleased with the result of the raising in what are difficult conditions for resource companies," said Richard Seville, Orocobre’s managing director.
"We are now well funded to take Olaroz and the company through to the next stage of development, becoming a profitable operating company," Seville added.
Approximately 15.7m shares will be issued pursuant to Orocobre’s 15% capacity on the ASX, at a price of A$2.55/share. This is still subject to shareholder approval, which will be assessed at a general meeting in March.
The company is also announcing a share purchase plan which will be capped at A$15m, of which $10m will be underwritten. Shareholders will be invited to invest up to $15,000 each.
"Although we welcome some new shareholders onto the register, we are honoured by the ongoing support we have received from our existing shareholders in this raising. We will continue to work hard to build on the shareholder value that we have delivered to date," Seville said.
Olaroz plant
Orocobre says that its Olaroz plant has approximately 20,000 tonnes of lithium carbonate equivalent (LCE) in the pond system. It also claims the lithium inventory is growing at around 2,100 tpm LCE, according to current well pump rates.
"The majority of our material will be going to Japan, Korea and the US," James Calaway, Orocobre’s North American chairman, told IM.
"We will not only be supplying end users but also large producers, who are needing more supply," Calaway added.
Lithium demand is forecast to rise thanks to growing acceptance of electric vehicles (EVs), consumer electronics and energy storage.
In November 2014, Olaroz started producing primary lithium carbonate. Since then, the focus has been on commissioning the purification and drying/micronising circuits.
Since April 2011, Olaroz’s pilot plant has been distributing lithium carbonate to customers which Orocobre say will make the approval process a maximum of three to six months.
Toyota Tsusho Corporation, the company’s project partner, has finalised several customer contracts for 2015 output and it expects that the remainder will be completed during the first half of 2015.
Orocobre is now considering whether to increase the life of Olaroz with its phase II expansion. It is also looking into developing its other lithium assets in Argentina.
*Conversion made February 2015
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