Why the Orocobre share price sank to a 52-week low today

The Orocobre Limited (ASX:ORE) share price sank to a 52-week low on Tuesday after the lithium miner downgraded its production guidance…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Unfortunately for its long-suffering shareholders, the Orocobre Limited (ASX: ORE) share price has continued its poor run and sunk lower once again on Tuesday.

At one stage the lithium miner's shares were down 5% to a 52-week low of $2.91. They have since recovered slightly but are still down 3.5% to $2.96 at the time of writing.

This latest decline means that the Orocobre share price has lost a massive 57% of its value over the last 12 months.

Why is the Orocobre share price sinking lower today?

This morning Orocobre announced that its Olaroz Lithium Facility in Argentina has been impacted by unfavourable weather conditions.

According to the release, after completing an internal review of expected production for the remainder of the financial year, management has noted that recent rainfall has led to its brine feedstock being diluted. This is a key input in the production process.

As a result of this dilution, the company has been forced to downgrade its production guidance for FY 2019.

This time last month the company reiterated its guidance for full year production to be higher than that achieved in FY 2018, whereas now management expects it to be in line with last year's production.

Should you buy the dip?

While Orocobre and fellow lithium miner peers Galaxy Resources Limited (ASX: GXY) and Pilbara Minerals Ltd (ASX: PLS) are arguably trading at attractive levels after recent pullbacks, I wouldn't be a buyer of their shares until lithium prices have improved meaningfully and then been sustained.

Prices fell heavily in 2018 due largely to increasing supply and softening demand in the key China market. Orocobre, for example, recorded an average price received of US$10,587 per tonne in the December quarter, down 28% on the previous quarter.

Unfortunately, prices have continued to weaken so far in 2019, which I fear could weigh on the share prices of the lithium miners in the coming months.

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.

More on 52-Week Lows

A man with his back to the camera holds his hands to his head as he looks to a jagged red line trending sharply downward representing the ASX tech share sell-off today
52-Week Lows

3 ASX shares sinking to 52-week lows today

These ASX shares are having a bit of a nightmare this year.

Read more »

Young man sitting at a table in front of a row of pokie machines staring intently at a laptop. looking at the Crown Resorts share price
52-Week Lows

Star Entertainment share price crashes 26% upon return to trade

This is a new 52-week low.

Read more »

Rede arrow on a stock market chart going down.
Materials Shares

Core Lithium and 2 other ASX 200 lithium shares plunging to 52-week lows

Lithium stocks like Core are exploring new lows today.

Read more »

A man looks nervous as he inflates a balloon, scared it might pop.
Materials Shares

Arafura share price resets 52-week low after quarterly update

The rare earths explorer also announced the results of its share purchase plan today.

Read more »

A woman stands at her desk looking a her phone with a panoramic view of the harbour bridge in the windows behind her with work colleagues in the background.
Industrials Shares

APM shares rebound on Friday following 40% thrashing on weaker profit news

The international employment services company was punished for its 1H FY24 update.

Read more »

Piggy bank sinking in water symbolising a record low share price.
52-Week Lows

3 ASX 200 stocks starting the new year at near 52-week lows

Are these stocks buying opportunities?

Read more »

A businesswoman ponders why her boat is sinking in the ocean.
52-Week Lows

Lake Resources share price falls 7% to new 52-week low amid second strike AGM vote

Chair Stu Crow described "a year of significant progress" amid an 80% decline in the share price in 2023.

Read more »

A man sits uncomfortably at his laptop computer in an outdoor location at a table with trees in the background as he clutches the back of his neck with a wincing look on his face.
Materials Shares

Why did the Core Lithium share price just hit a 2-year low?

Top broker Goldman Sachs says falling lithium commodity prices may hit Core Lithium particularly hard.

Read more »