BRISBANE, Australia, July
19, 2017 /CNW/ --
JUNE QUARTER 2017 KEY POINTS1
OLAROZ LITHIUM FACILITY (ORE 66.5%)2
- Production of 2,536 tonnes of lithium carbonate for June
Quarter 2017
- FY17 production of 11,862 tonnes of lithium carbonate, up 72%
year on year (YoY)
- Sales revenue of US$27.4 million
on total sales of 2,566 tonnes for June Quarter
- FY17 sales revenue totalling US$120
million
- Average FOB price received up 5% quarter on quarter (QoQ) to
US$10,696/tonne FOB with higher
priced contracts reflecting firmer market conditions
- Cash cost of sales of US$4,279/tonne, up 20% QoQ with lower production
volumes and lower brine concentrations
- Gross cash margins remain steady at US$6,417/tonne maintaining a high margin of
60%
- VAT refunds of approximately US$10.8
million received in the quarter with total VAT refunds
received to date of approximately US$23.5
million
- Production in 1H FY18 is expected to increase significantly
compared to 2H FY17 and will be skewed to the December quarter with
increased evaporation rates through Spring and early Summer. Formal
production guidance will be given in August
2017
- Pricing is expected to exceed US$10,000 per tonne FOB in the September 2017 quarter
- Test work successfully completed with two specialized
engineering firms to finalise the process engineering for a 10,000
tonne per annum battery grade lithium hydroxide plant. Capital cost
and operating estimates will be received from both contractors
during the September quarter 2017
- Sales de Jujuy ("SDJ") successful in arranging with it local
bankers an export credit facility capped at US$25 million. This has facilitated the release
of additional SBLCs
BORAX ARGENTINA
- Sales volume in the June quarter was up 18% on the March
quarter 2017 to 11,398 tonnes
- Lower sales prices, inflation and severe weather conditions
impacted financial performance
- Tincalayu Expansion Project on schedule for completion in the
September quarter
ADVANTAGE LITHIUM AND CAUCHARI
- Advantage Lithium (ORE 35%) commenced a 17 hole drilling
program at Cauchari with the aim of providing an updated resource
estimate by the end of 2017
CORPORATE
- As at 30 June 2017, Orocobre
Group had available cash of US$51.5
million, up from US$30.6
million at 31 March 2017. This
follows the release of Standby Letters of Credit (SBLCs) of
US$21.2 million (ORE's share) back to
the Company during the quarter
- Orocobre completed the sale of exploration tenure at Salinas
Grandes to LSC Lithium Limited (TSXV: LSC) and received
US$4 million. A further US$3 million will be paid in three annual
tranches
- Inflation during FY17 has been 11% higher than the
corresponding devaluation of the ARS peso against the USD which has
resulted in higher costs at Borax Argentina SA and to a lesser
extent SDJ
OLAROZ LITHIUM FACILITY
For more information on Olaroz please click here
The Olaroz Lithium Facility is located in the Jujuy province of
Argentina. Together with partners,
Toyota Tsusho Corporation (TTC) and Jujuy Energia y Mineria
Sociedad del Estado (JEMSE), Orocobre is now operating the
first large scale lithium brine plant to be commissioned in
approximately 20 years.
The Olaroz Lithium Facility joint venture is operated through
Argentine subsidiary SDJ. The effective equity interests are:
Orocobre 66.5%, TTC 25.0% and JEMSE 8.5%.
PRODUCTION, SALES AND OPERATIONAL UPDATE
PRODUCTION AND SALES
Production for the quarter was 2,536 tonnes. Operations
were impacted by weather conditions slowing pond evaporation
rates and preventing delivery of a soda ash, a key reagent in the
production process, which resulted in the cessation of operations
for three days.
For FY17, total production is up 72% on FY16 to 11,862
tonnes.
Sales revenue for the quarter was US$27.4
million on total sales of 2,566 tonnes with average sales
prices up 5% to US$10,696/tonne3. The cash cost
of sales was US$4,279/tonne, up 20%
QoQ due to lower production levels and higher soda ash consumption
from lower brine concentrations. Costs are expected to decrease as
brine concentration and production increases with accelerating
evaporation rates through Spring and Summer.
Gross cash margins for the quarter remained strong at
US$6,417/tonne with the increase in
sales prices offsetting the increase in costs. Overall gross
operating margins remain strong at 60%.
SDJ remains strongly operating cashflow positive.
Metric
|
June
quarter 2017
|
March
quarter 2017
|
Change QoQ
(%)
|
Production
(tonnes)
|
2536
|
2784
|
-9%
|
Sales
(tonnes)
|
2566
|
3142
|
-18%
|
Average price
received (US$/tonne)
|
10696
|
10211
|
5%
|
Cost of sales
(US$/tonne)4
|
4279
|
3565
|
20%
|
Revenue
(US$M)
|
27.4
|
32.1
|
-14%
|
Gross cash margin
(US$/tonne)
|
6417
|
6646
|
-3%
|
Gross cash margin
(%)
|
60%
|
65%
|
-8%
|
OPERATIONAL UPDATE
Operations during the quarter continued to focus on pond
management both from the perspective of inter-pond brine transfer
and operational controls and monitoring. During the quarter,
the design for the improved pumping system was finalised resulting
in the program being increased to six pumps, remote monitoring
systems and additional water cleaning lines to the pumps for a
revised capital cost of US$2.7m. This program will be undertaken in
two stages with the most important stage being completed by October
when evaporation rates increase in conjunction with the need to
increase inter-pond brine transfers. At a day to day
operational level additional management positions have been
established including Pond Operations Superintendent and Process
Manager. An indicator of improved pond management is the
increase in area under evaporation which maximises evaporation
efficiency. As can be seen in the chart below, the pond area under
evaporation has been maintained in excess of 90% since the initial
review in February 2017.
As previously advised at the half year results, the process of
re-establishing the correct inventory profile (volume and
concentration) would take approximately six months and is expected
to be completed in August. The six month duration is due to the
pond system having significant inertia and the process occurring
during the low evaporation time of the year.
The chart below shows the seasonality of average evaporation
rates and the historical and forecast harvest pond inventory
profile. The inventory profile reaches the minimum level in
July prior to a rapid increase through September to December driven
by the corresponding increase in evaporation rates and movement of
inventory from earlier ponds. The actual pond profile deviates
slightly from that predicted due to the recent cloudy and snowy
weather conditions previously reported. It can also be seen that
the level of deviation of harvest pond inventory is relatively
insignificant compared to the increase that is modelled to occur
throughout the rest of the calendar year. The relative
performance is similar in primary and intermediate ponds and the
Company is encouraged that the measured data overall is correlating
well with predicted performance from the pond evaporation and
production model.
One of the key findings in the review of pond operating
practices has been that production reliability and resistance to
adverse weather conditions will be improved through maintaining a
higher level of inventory in the harvest ponds. As such, the
future lowest point of inventory will be significantly higher than
that experienced this past year and result in higher concentrations
to the plant throughout the cycle.
To enable production modelling and forecasting Orocobre
commenced a process of bathymetric surveys in April 2017.
However, strong winds severely slowed the process as flat surface
conditions are needed for the surveys. The work has been suspended
until October when wind conditions are normally more
favourable. To provide an alternative source of data the
focus has changed to more direct measurement and surveys of drained
areas. This work has highlighted that some further testing of
salt density is required prior to finalising the production model
and issuing formal production guidance which is now expected in
August 2017.
Prior to the pond issue, the purification circuit has achieved a
maximum throughput rate of 43 tonnes per day (tpd) and runs
consistently at 35-40 tpd (73-83% of nameplate). Recently
fitted hydrocyclones are expected to allow the purification circuit
to achieve nameplate capacity of approximately 48 tonnes per
day.
The primary circuit runs consistently above nameplate capacity
with a maximum achieved throughput of 66 tpd some 35% above design
rate of 48 tpd.
BRINE INVENTORY
At the end of the June quarter 2017, brine inventory was
approximately 38,300 tonnes of lithium carbonate equivalent.
MARKET AND SALES
Total volume of lithium carbonate sold in the June quarter
amounted to 2,566 tonnes. Lithium carbonate prices increased
5% to US$10,696/tonne (FOB) for the
quarter. The price achieved for the quarter is a result of higher
pricing in short term contracts compared to last quarter.
LITHIUM MARKET
Contract prices for lithium carbonate remain above US$10,000/t after doubling in 2016. Market growth
rates have lifted from 10% p.a. to over 12% p.a. and are expected
to reach over 15% by 2020. The key driver for demand growth
has also shifted – the adoption of lithium-ion battery in personal
electronics such as laptops, tablets and phones which drove the
first demand surge has reached the mature phase of the product life
cycle (in developed economies at least). However, a more
significant growth catalyst in terms of potential lithium
consumption has emerged, being world-wide adoption of electric
vehicles (EV's) encouraged by government incentives and
infrastructure, falling costs of battery packs, improved
performance of rechargeable batteries and a greater range of EV
models to suit end-consumer needs.
In 2016 EV penetration was approaching 1% worldwide.
Several European countries however were ahead of the adoption curve
including Norway and the Netherlands having achieved EV shares of
25% and 10% respectively due to early introduction of government
incentives beginning in 1996 ("Global EV Outlook 2016",
OECD/International Energy Agency). Twenty years later
countries with much higher car ownership and fleet numbers have
begun to implement similar incentives and develop charging
infrastructure. As of 2016 14 countries participating in EV
incentive programs had announced targets that would require 12.7
million new EVs between 2016 and 2020 and approximately 493,000
tonnes of lithium carbonate equivalent (LCE).
The rechargeable battery manufacturing industry has signalled a
confidence in the industry with worldwide manufacturing capacity
set to quadruple from ~75 GWh currently to over 305 GWh by 2020
(Benchmark Minerals). The vast majority of large scale car
manufacturers currently have, or will soon release, an EV model
encouraged by growing consumer demand, government manufacturer
incentives and decreasing li-ion battery pack costs, which have
fallen from US$600/kwh in 2012 to
~US$150/kwh just five years later
(Lux Research, 2016). Installed battery manufacturing
capacity was estimated to be operating above 90% utilisation in
2016 (Roskill, 2017) therefore additional battery capacity is
required to ensure continued EV growth at or above the current rate
of 40% p.a.
While there is much divergence between forecasts of EV
penetration rates the general consensus is growth rates will reach
at least 45% by 2020 resulting in EV penetration of approximately
4.5%. Similarly, forecast lithium demand from the energy
storage systems (ESS) segment varies widely as growth of between
20% to 25% p.a. has been recorded in the past three years
(Roskill). It is Orocobre's view that ESS development
will continue and exceed 30% p.a. growth by 2020 as renewable energy targets are more likely to
be achieved when renewable energy sources are combined with ESS as
exemplified by the South Australian government's plan to install a
100gWh battery factory. EV and ESS together with healthy
baseload demand in line with GDP growth, will require at least
350ktpa of LCE production by 2020.
These robust demand dynamics have compounded concern regarding a
significant lithium carbonate supply shortage given the current
market tightness. Slower than expected project ramp ups have
moderated supply expectations as the industry has become aware of
the challenges involved in ramping up lithium projects given scarce
industry experience and highly technical 'bespoke' operations with
unique and sometimes unpredictable challenges. As the risks
involved in raw material operations, processing, supply security
and financing become more apparent, strategic partnerships have
become a necessity. Vertical integration and/or strong partnerships
are particularly important for hard rock operations given the
additional capital required for spodumene mining, processing and
conversion as well as the broad technical skills required to
produce lithium carbonate or hydroxide.
The recent funding arrangements of hard rock projects
demonstrates that funding of new lithium production remains
challenging, high cost and an impediment to new production.
Given growth is not expected to slow in the foreseeable future
vertical integration is likely to continue. There is
significant potential for greater involvement and investment in
lithium projects from downstream participants including battery and
EV manufacturers, however widespread understanding of capital
intensity, project ramp-up challenges and supply chain lead times
(from lithium production to consumption in end-use segments) is
required to encourage the necessary
investment.
LITHIUM HYDROXIDE PLANT
UPDATE ON PROGRESS
Olaroz industrial grade lithium carbonate and locally sourced
Japanese lime have been used as feedstock for testing of process
design to produce lithium hydroxide by two specialised engineering
firms. The test work demonstrated that a very high quality lithium
hydroxide could be produced from Olaroz lithium carbonate using a
customised process. The test work has also highlighted
opportunities to reduce lithium losses during conversion from
carbonate to hydroxide.
Lithium hydroxide currently sells at a significant premium
compared to lithium carbonate.
Contract negotiations are continuing with the two firms to
determine the preferred contractor. The selection criteria
for choice of engineering contractor includes turn-key
commissioning and personnel training with process, product quality
and performance guarantees.
Capital and operating costs for the lithium hydroxide plant in
Japan will be advised by the
engineering firms during the September quarter.
Subject to joint venture approvals and finalisation of financing
and permitting, construction could commence in November 2017 with commissioning 12 months later.
Orocobre does not anticipate the need to raise equity capital for
this project.
EXPANSION STUDY FOR OLAROZ
The Phase 2 expansion investment decision remains dependent on
achieving Phase 1 design production rates and the expansion being
funded without further equity capital (i.e. funded by project
finance and Phase 1 operating cashflow).
REVISED SCOPE OF PHASE 2 EXPANSION STUDIES
On 15 December 2016, Orocobre
announced the results of scoping studies into the expansion of
Olaroz and the proposed doubling of production at a cost of
US$190 million including US$25 million contingency. Subsequently,
these plans have been simplified to remove the purification circuit
from the incremental production. The resultant product mix is
17,500 tonne per annum Battery Grade lithium carbonate (>99.5%)
from the existing purification circuit and 17,500 tonne per annum
Industrial Grade lithium carbonate (avg. 99.0%) which will provide
feedstock for the planned lithium hydroxide plant in Japan.
This simplified strategy results in lower capital expenditure of
approximately US$160 million
including a US$25 million contingency
and lower implementation risk as the project is based around a
simple duplication of bores, ponds and primary circuit of Phase 1
at Olaroz. The full cost of the pond system contained within the
total capital expenditure estimate for Phase 2 is
US$75 million.
GHD has been appointed to oversee engineering design studies for
the Olaroz Phase 2 expansion. Arrangements were terminated
with Ausenco after they withdrew services from South America following a corporate
restructure. No significant delays are expected with this
change however progress against schedule is being actively
monitored.
The process to obtain necessary permits and approvals for Phase
2 continues to run concurrently with engineering, design and
selection of mechanical equipment such as centrifuges, filters and
reactors. Test work is continuing to allow further
optimisation of design and process beyond that already identified
from commissioning and operation of Phase 1.
The expansion studies are not managed by the SDJ operating team
but by consultants and a dedicated ORE study manager.
BORAX ARGENTINA
The focus in FY17 for Borax Argentina has been to increase
production rates and reduce unit costs at operations following
optimisation projects at Tincalayu and Campo Quijano, whilst building suitable
inventory levels. In sales and logistics, the focus has been
on developing new customers whilst improving response times and
delivery performance and thereby reinforcing Borax's value
proposition as the producer integral to a customer's security of
supply strategy.
OPERATIONS
Sales volumes in the June quarter 2017 were up 18% on the March
quarter to 11,398 tonnes of combined product. There were no tonnes
of tincal ore sold this quarter.
Operating conditions have been challenging during the last
quarter due to severe weather that saw heavy snowfall.
At Tincalayu, snow and freezing weather significantly affected
mining and the transport of water resulting in processing
operations being suspended for a cumulative 10 day period and the
loss of approximately 700 tonnes of decahydrate equivalent
production. Wet ore caused by the snow continued to impact on
production rate through to the end of the quarter. The Sijes
operations were less affected with approximately 200 tonnes of lost
concentrate production and delays in the export of
product.
COMBINED PRODUCT SALES VOLUME BY QUARTER
Previous Year
Quarters
|
Recent
Quarters
|
September
2015
|
8,124
|
September
2016
|
11,940
|
December
2015
|
10,078
|
December
2016
|
8,767
|
March 2016
|
8,006
|
March 2017
|
9,672
|
June 2016
|
9,274
|
June 2017
|
11,398
|
TINCALAYU EXPANSION STUDY
A study commenced in Q2 CY16 to evaluate a potential expansion
of the Tincalayu refined borates operation from its current
production capacity of 30,000 to 100-120,000 tonnes per annum and
an integrated 40,000 tonne boric acid plant.
It is anticipated that the potential expansion will further
enhance efficiencies in the production of refined borates at
Tincalayu and contribute to improved manufacturing unit costs.
Approvals have been received for a new gas pipeline to supply the
expanded plant and initial cost estimates are under review.
The feasibility study will be completed during the September
quarter.
MARKET CONDITIONS
Market conditions remain difficult in the core South American
markets of Argentina and
Brazil. Borax Argentina continues to grow strong long term
relationships with key customers while expanding the customer base.
The continued focus on production efficiencies is required to
cushion the effect of market pricing remaining at the bottom of the
price cycle.
Prices of all borate products remain under pressure, in
particular boric acid pricing continues to decline.
In addition to price pressure the operations are seeing
inflation of costs which is exceeding devaluation of the Peso. FY17
has seen inflation of 21.8% while the Peso has only devalued by
10.8%.
The combination of low prices, inflationary costs and difficult
operating conditions have resulted in a disappointing financial
performance at Borax Argentina SA.
SAFETY AND COMMUNITY
SAFETY MILESTONE
The Olaroz site has recently achieved a significant milestone of
220 days of operation without a lost time injury.
At Borax, a new safety management system SICOP was installed
during the quarter which is expected to streamline access and
awareness of safety documentation. First aid training for staff was
conducted during the quarter.
An inspection by local Environmental Authorities noted that the
Tincalayu and Sijes sites were exemplary in waste management and
that Borax Argentina was one of the top four companies for
compliance with waste management regulations throughout the Salta
region.
SHARED VALUE PROGRAM
Sales de Jujuy received recognition from a forum hosted by Banco
Interamericano de Desarrollo (BID) for our Shared Value program.
Demetrio Nieva from the Olaroz Chico
community travelled to Buenos
Aires to share his community's experiences. Orocobre
was represented by Silvia Rodriguez
our Shared Value Manager.
BID is the main source of financing for development in
Latin America and has areas of
focus that include three development challenges - social inclusion
and equity, productivity and innovation and economic
integration.
ISO RE-CERTIFICATION
At Olaroz, audits have been completed for the Maintenance of
Certification (ISO 9000 Quality Standard) and Re-certification of
the Environmental Standard (ISO 14000). This follows the
audit in the March quarter of all Borax sites: Campo Quijano, Tincalayu, Sijes and
Porvenir.
ADVANTAGE LITHIUM
As previously announced, Orocobre completed the sale of a suite
of exploration assets to Advantage Lithium Corp (TSV: AAL) in the
March 2017 quarter. AAL is well
funded having raised C$20,000,000
capital in February 2017. Orocobre
holds 46,325,000 (35%) of the issued shares of AAL and 2,550,000
warrants exercisable at C$1.
Orocobre retains a 50% interest in the Cauchari Project and AAL
has the right to increase its interest to a total of 75% by the
expenditure of US$5,000,000 or
production of a Feasibility Study. AAL also took a 100% interest in
five other lithium properties that were previously held by Orocobre
totalling 85,543 hectares.
The AAL technical team is led by Callum
Grant. Callum is an engineer with broad experience from
exploration to production focusing on South America and in particular, Argentina.
The flagship Cauchari Property has an existing inferred resource
of 470,000 tonnes of Lithium Carbonate Equivalent and a large
exploration target to be tested with a 17 hole drill program.
Drilling commenced in May 2017 with
the successful casing of Hole CAU07, the first of the five-hole
Phase One program located in the North-West block of the Cauchari
property. Down-the-hole geophysical response in CAU07R
suggests brine conditions begin at a depth of 60-70m. Sampling and
testing of the fluid in the hole will be conducted once the drill
rig returns to CAU07R and at that time information will be
available on the chemical composition of the fluid5.
The drill program is on budget and initial sampling results are
expected to be available in July along with geophysical profiling
which will provide key information on target zones through the salt
lake sedimentary sequence.
The objective of work at Cauchari is to rapidly advance the
property through exploration and towards development by
2018/2019. A diamond drill program to complement the rotary
program will be conducted over the December half year. The overall
objective for 2017 remains an updated resource estimate combining
both NW and SE blocks of Cauchari moving into a Scoping Study in
early 2018. More advanced technical and engineering studies will
continue through 2018 and into 2019 leading to a Bankable
Feasibility Study with the required environmental permits for the
development phase.
CORPORATE AND ADMINISTRATION
SALINAS GRANDES
During the quarter Orocobre completed an agreement for the sale
of exploration tenure at Salinas Grandes to LSC Lithium Limited
(TSXV: LSC).
Pursuant to the Orocobre-LSC Agreement, LSC acquired mining
properties located at Salinas Grandes in Salta and Jujuy provinces,
Argentina ("Salinas Grandes
Tenements"), which were held by Orocobre.
As consideration for the sale of the Salinas Grandes Tenements,
LSC:
- Paid Orocobre US$4 million;
- Transferred to Orocobre three properties located at Olaroz
("Olaroz Tenements") adjacent to current project properties
covering approximately 3,821 hectares thus strengthening Orocobre's
position at its flagship project; and
- Granted Orocobre a 2% royalty on the brine concentrate produced
from Salinas Grandes Tenements, calculated on the same basis as the
royalties paid by Sales de Jujuy at the Olaroz Lithium Facility to
the Jujuy Provincial Government.
LSC will pay a further US$3
million payable by way of three annual tranches of
US$1 million in June 2018, June
2019 and June 2020.
FINANCE
VAT
VAT refunds of approximately US$10.8
million have been received by SDJ during the quarter with
approximately US$23.5 million of VAT
refunds received to date.
Total remaining VAT refund entitlement amounts to US$20 million on an undiscounted basis. The
VAT balance outstanding takes into account the monthly debits and
credits and does not relate solely to construction VAT.
Post the end of the quarter, April's VAT presentation of
~US$1.2M was approved and such funds
are expected to be received in the coming weeks.
CASH BALANCE, DEBT POSITION AND STANDBY LETTERS OF
CREDIT
As at 30 June 2017, Orocobre Group
had available cash of US$51.5 million
following guarantee (SBLC) releases of approximately US$21.2 million (ORE's share) during the quarter
and payment received from the LSC transaction of US$4 million. During the quarter,
US$1.9 million was provided to Borax
Argentina due to the significant impact on production caused by
adverse weather conditions (as previously reported), low prices,
poor credit conditions and operating costs impacted by inflation
(see comments below).
At 30 June 2017, Orocobre had net
debt of US$65.3 million as detailed
below:
Loan
(US$M)
|
Lender
|
ORE
share
|
Facility
size
|
30 June 2017
balance
|
ORE share of
external debt
|
|
|
|
100%
|
(100% SDJ
SA)
|
(30 June
2017)
|
SDJ
|
Project level –
SDJ
|
Mizuho
Bank
|
66.50%
|
191.9
|
155.0
|
103.1
|
Working
Capital
|
HSBC
Argentina
|
72.68%
|
40.0
|
15.2
|
9.8
|
and Macro bank
Argentina
|
8.6
|
0.0
|
0.0
|
HSBC
Pre-Export
|
66.50%
|
25.0
|
22.0
|
14.6
|
Shareholders
loans
|
ORE / TTC
|
Internal
(75%)
|
54.7
|
54.7
|
0.0
|
Shareholders
loans
|
ORE
|
Internal
(100%)
|
18.0
|
18.0
|
0.0
|
|
|
|
|
|
Shareholders
loans
|
SDJ PTE
|
Internal
(72.68%)
|
1.0
|
1.0
|
0.0
|
Total
SDJ
|
|
|
339.2
|
265.9
|
127.5
|
|
|
|
|
|
|
Borax
|
|
|
|
|
|
Productive
loan
|
HSBC
Argentina
|
|
4.8
|
0.9
|
0.9
|
Pre-export
|
HSBC
Argentina
|
|
0.5
|
0.5
|
0.5
|
Working capital
facilities
|
Macro and
Patagonia
|
|
0.5
|
0.5
|
0.5
|
Total
Debt
|
|
|
344.9
|
267.7
|
129.3
|
Cash –
SDJ
|
|
66.50%
|
|
-4.0
|
-2.7
|
Cash – Orocobre
Group
|
|
|
|
-51.5
|
-51.5
|
Financial
Assets
|
|
|
|
-9.8
|
-9.8
|
(cash backing of
Working Capital facility
through SBLC's and guarantees)
|
|
|
|
Net Debt to
Orocobre
|
|
|
|
|
65.3
|
SDJ will make a further payment to Mizuho Bank in September
2017 of approximately US$14
million.
SDJ put in place a US$25 million
pre-export finance facility in the June quarter which allowed the
release of further SBLCs back to shareholders (ORE and Toyota
Tsusho Corporation). SDJ's working capital facilities were reduced
to US$37.2 million at 30 June of
which US$15.2 million is guaranteed
by SBLCs and the balance being the pre-export finance facility of
US$22 million.
INFLATION VERSUS DEVALUATION
The AR$/US$ exchange rate weakened by 8% during the quarter from
AR$15.39/US$ at 31 March 2017 to AR$16.63/US$ at 30 June 2017 whilst inflation for the same period
was 5.3%. For the financial year devaluation of the ARS$ against
the US$ was 10.8% versus inflation of 21.8%. This resulted in 11%
higher than expected US$ costs for ARS peso denominated expenses at
both SDJ and Borax Argentina SA.
The effect of inflation and devaluation over time generally
shows that they cancel each other out. When looking at specific
periods such as the financial year that has just passed, inflation
was 11% higher than devaluation, resulting in higher costs at both
Borax Argentina and to a much lesser extent SDJ.
FOR FURTHER INFORMATION PLEASE CONTACT:
Andrew Barber
Investor Relations Manager
Orocobre Limited
T: +61 7 3871 3985
M:+61 418 783 701
E:
abarber@orocobre.com
ABOUT OROCOBRE LIMITED
Orocobre Limited is listed on the Australian Securities Exchange
and Toronto Stock Exchange (ASX: ORE) (TSX: ORL), and is building a
substantial Argentinian-based industrial chemicals and minerals
company through the construction and operation of its portfolio of
lithium, potash and boron projects and facilities in the Puna
region of northern Argentina. The
Company has built, in partnership with Toyota Tsusho Corporation
and JEMSE, the first large-scale, greenfield brine based lithium
project in approximately 20 years at the Salar de Olaroz with
planned production of 17,500 tonnes per annum of low-cost lithium
carbonate.
The Olaroz Lithium Facility has a low environmental footprint
because of the following aspects of the process:
- The process is designed to have a high processing recovery of
lithium. With its low unit costs, the process will result in low
cut-off grades, which will maximise resource recovery.
- The process route is designed with a zero liquid discharge
design. All waste products are stored in permanent impoundments
(the lined evaporation ponds). At the end of the project life the
ponds will be capped and returned to a similar profile following
soil placement and planting of original vegetation types.
- Brine is extracted from wells with minimum impact on freshwater
resources outside the salar. Because the lithium is in sedimentary
aquifers with relatively low permeability, drawdowns are limited to
the salar itself. This is different from halite hosted deposits
such as Salar de Atacama, Salar de
Hombre Muerto and Salar de Rincon
where the halite bodies have very high near surface permeability
and the drawdown cones can impact on water resources around the
Salar affecting the local environment.
- Energy used to concentrate the lithium in the brine is solar
energy. The carbon footprint is lower than other processes.
- The technology developed has a very low maximum fresh water
consumption of <20 l/s, which is low by industry standards. This
fresh water is produced by reverse osmosis from non-potable
brackish water.
- Sales de Jujuy S.A. is also committed to the ten principles of
the sustainable development framework as developed by The
International Council on Mining and Metals. The company has an
active and well-funded "Shared Value" program aimed at the long
term development of the local people.
The Company continues to follow the community and shared value
policy to successfully work with suppliers and the employment
bureau to focus on the hiring of local people from the communities
of Olaroz, Huancar, Puesto Sey, Pastos Chicos, Catua, Susques,
Jama, El Toro, Coranzulí, San Juan and Abrapampa. The project
implementation is through EPCM (Engineering, Procurement and
Construction Management) with a high proportion of local
involvement through construction and supply contracts and local
employment. The community and shared value policy continues to be a
key success factor, training local people under the supervision of
high quality experienced professionals.
TECHNICAL INFORMATION, COMPETENT PERSONS' AND QUALIFIED
PERSONS STATEMENTS
The Company is not in possession of any new information or data
relating to historical estimates that materially impacts on the
reliability of the estimates or the Company's ability to verify the
historical estimates as mineral resources, in accordance with the
JORC Code. The supporting information provided in the initial
market announcement on 21/08/12
continues to apply and has not materially changed. Additional
information relating to the Company's Olaroz Lithium Facility is
available on the Company's website in "Technical Report – Salar de
Olaroz Lithium-Potash Project, Argentina" dated May 113, 2011 which was
prepared by John Houston, Consulting
Hydrogeologist, together with Mike
Gunn, Consulting Processing Engineer, in accordance with NI
43-101.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This news release contains "forward-looking information" within
the meaning of applicable securities legislation. Forward-looking
information contained in this release may include, but is not
limited to, the completion of commissioning, the commencement of
commercial production and ramp up of the Olaroz Lithium Facility
and the timing thereof, the cost of construction relative to the
estimated capital cost of the Olaroz Lithium Facility, the meeting
of banking covenants contained in project finance documentation,
the design production rate for lithium carbonate at the Olaroz
Lithium Facility, the expected brine cost and grade at the Olaroz
Lithium Facility, the expected operating costs at the Olaroz
Lithium Facility and the comparison of such expected costs to
expected global operating costs, the estimation and conversion of
exploration targets to resources at the Olaroz Lithium Facility,
the viability, recoverability and processing of such resources, the
potential for an expansion at the Olaroz Lithium Facility and the
outcome of studies currently being undertaken into the proposed
expansion at Olaroz and elsewhere, the capital cost of an expansion
at the Olaroz Lithium Facility; the future performance of the
relocated borax plant and boric acid plant, including without
limitation the plants estimated production rates, financial data,
the estimates of mineral resources or mineralisation grade at Borax
Argentina mines, the economic viability of such mineral resources
or mineralisation, mine life and operating costs at Borax Argentina
mines, the projected production rates associated with the borax
plant and boric acid plant, the market price of borate products
whether stated or implied, demand for borate products and other
information and trends relating to the borate market, taxes
including recoveries of IVA, royalty and duty rate and the ongoing
working relationship between Orocobre and the Province of Jujuy,
TTC and Mizuho Bank.
Such forward-looking information is subject to known and unknown
risks, uncertainties and other factors that may cause actual
results to be materially different from those expressed or implied
by such forward-looking information, including but not limited to
the risk of further changes in government regulations, policies or
legislation; the possibility that required concessions may not be
obtained, or may be obtained only on terms and conditions that are
materially worse than anticipated; that further funding may be
required, but unavailable, for the ongoing development of the
Company's projects; changes in the scope and focus of studies
currently being undertaken with respect to the expansion of the
Company's production facilities, fluctuations or decreases in
commodity prices and market demand for product; uncertainty in the
estimation, economic viability, recoverability and processing of
mineral resources; risks associated with weather patterns and
impact on production rate; risks associated with commissioning and
ramp up of the Olaroz Lithium Facility to full capacity; unexpected
capital or operating cost increases; uncertainty of meeting
anticipated program milestones at the Olaroz Lithium Facility;
general risks associated with the further development of the Olaroz
Lithium Facility; general risks associated with the operation of
the borax plant or boric acid plant; the potential for an expansion
at the Tincalayu operations and the outcome of studies currently
being undertaken into the proposed expansion at Tincalayu a
decrease in the price for borates resulting from, among other
things, decreased demand or an increased supply of borates or
substitutes, as well as those factors disclosed in the Company's
Annual Report for the year ended June 30,
2016 filed at www.sedar.com.
The Company believes that the assumptions and expectations
reflected in such forward-looking information are reasonable.
Assumptions have been made regarding, among other things: the
timely receipt of required approvals and completion of agreements
on reasonable terms and conditions; the ability of the Company to
obtain financing as and when required and on reasonable terms and
conditions; the prices of lithium, potash and borates; market
demand for products and the ability of the Company to operate in a
safe, efficient and effective manner. Readers are cautioned that
the foregoing list is not exhaustive of all factors and assumptions
which may have been used. There can be no assurance that
forward-looking information will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such information. Accordingly, readers should not
place undue reliance on forward-looking information. The Company
does not undertake to update any forward-looking information,
except in accordance with applicable securities laws.
1 All figures presented in this report are
unaudited
2 All figures 100% Olaroz Project basis
3 Note: Orocobre reports price as "FOB" (Free On Board)
which excludes additional insurance and freight charges included in
"CIF" (Cost, Insurance and Freight or delivered to destination
port) pricing. The key difference between an FOB and CIF
agreement is the point at which responsibility and liability
transfer from seller to buyer. With a FOB shipment, this typically
occurs when the goods pass the ship's rail at the export port. With
a CIF agreement, the seller pays costs and assumes liability until
the goods reach the port of destination chosen by the buyer.
The Company's pricing is also net of TTC commissions.
The intention in reporting FOB prices is to provide clarity on the
sales revenue that flows back to SDJ, the joint venture company in
Argentina.
4 Excludes royalties and head office costs
5 The reader is cautioned that the interpretation of
brine is based on indirect geophysical methods and there is no
guarantee that brine would contain lithium at an economic
concentration.
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SOURCE Orocobre Limited