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Lithium miner Orocobre Limited (ASX:ORE) delivers record sales result

High Five, happy, business

On Thursday the Orocobre Limited (ASX: ORE) share price bounced back from an early decline and finished the day flat at $4.63.

Although the market initially reacted poorly to its quarterly update, by the close of play it had warmed to it.

What happened in the fourth quarter?

In the fourth quarter of FY 2018 Orocobre achieved its second-highest quarterly production result with 3,596 tonnes of lithium carbonate produced, up 28% on the prior quarter.

Despite concerns over weakening lithium prices for Orocobre and peers such as Galaxy Resources Limited (ASX: GXY)Kidman Resources Ltd (ASX: KDR), and Pilbara Minerals Ltd (ASX: PLS), the miner enjoyed record realised prices of US$13,653 per tonne on a free on-board basis.

Unsurprisingly, the combination of this strong production and high prices led to record quarterly sales of US$44.4 million on 3,255 tonnes of lithium carbonate. This would have been stronger had it not been for unforeseen port shipping delays.

Pleasingly, the company saw its cash costs fall 13% quarter-on-quarter to US$3,800 per tonne, leading to record gross cash margins of US$9,853 a tonne. Management believes this demonstrates the profitability and cash generation capability of the Olaroz operations.

For the full-year the company produced a total of 12,470 tonnes, up 5% year on year. Sales volumes hit 11,837 tonnes, with an average price received of US$12,578 a tonne.

This ultimately led to total sales revenue of US$148.9 million in FY 2018, up 24% on the previous year.

Should you invest?

I thought that this was a strong quarter from Orocobre and was pleased to see that prices actually rose. Especially considering how concerns over pricing has put a lot of pressure on lithium miners in recent months.

While I think that Orocobre would be a good (high risk) resources investment based on this quarter, I would still choose rival Galaxy ahead of it.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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