The Orocobre Limited (ASX: ORE) share price has climbed higher this morning following the release of its quarterly update.
At the time of writing the lithium miner's shares are up 5% to $4.72, stretching its three-month return to almost 50%.
How was the last quarter?
For the quarter ending September 30 Orocobre generated sales revenue of US$23.2 million ($30.3 million) on total sales of 2,072 tonnes at an average sales price of US$11,190 per tonne.
While this was a solid 5% increase on the average sales price in the preceding quarter, unfortunately costs grew substantially during the quarter and weighed on its margins.
Cost of sales increased 17% to US$4,987 per tonne as a result of lower production volumes in July and August and increased soda ash unit costs due to the impact of bad weather in June.
Pleasingly, costs are expected to reduce again as production ramps up in the second-half and soda ash costs and consumption normalise.
Another positive is the state of the lithium market. The company's analysis has once again determined that demand for lithium continues to grow at a rate which supply struggled to meet.
And while major producers SQM and Albemarle have expansion plans in the works, this increase in supply is not expected to reach the market in full until 2020.
In light of this, management expects any increase in supply over the next few years to be quickly absorbed, keeping prices above US$10,000 per tonne.
Should you invest?
Although I think the rise of electric vehicles and renewable energy means that Orocobre, Galaxy Resources Limited (ASX: GXY), and Pilbara Minerals Ltd (ASX: PLS) will each have bright futures ahead of them, I continue to believe their shares are fully valued now after recent rallies.
As a result, I would class them all as holds and suggest investors wait for a pull back before investing.
