The Orocobre Limited (ASX: ORE) share price is rising today, currently trending up 3.47% as the lithium miner reported record production and positive cash flows despite the soft market.
Record production
In its first-half results, Orocobre reported record production at its Olaroz lithium facility with 6,679 tonnes of lithium carbonate produced, up 10% on the prior corresponding period (pcp). The miner is seeking to increase the proportion of purified production and reports the quality of brine and process stability is improving.
New ponds and improved management are delivering improved brine quality, product quality, and processing capability/stability. Long term contracts have been signed for the supply of battery grade lithium carbonate.
Sales and revenue
Orocobre reported sales of 6,395 tonnes of lithium carbonate from the Olaroz site, up 24%, with an average sales price of US$6,157 per tonne. The price of lithium carbonate has fallen significantly since 1H19 when the average sales price was US$12,295.
Revenue for 1H20 was US$39.4 million, with a strong margin of 25% maintained for the half. The Olaroz cash cost of goods sold, however, increased to US$4,643 a tonne, up from US$4,251 a tonne. This was primarily due to a reduction in export incentive following lower sales revenue and a warranty provision relating to packaging costs.
Earnings and profits
Earnings before interest, tax, depreciation and amortisation, impairment and foreign currency gains/losses (EBITDAIX) was US$6.1 million for Olaroz. At a group level, Orocobre reported EBITDAIX of US$2.1 million, and a loss of US$18.9 million, with an underlying loss of US$9.9 million falling from a profit of US$24 million in FY19. The loss was impacted by non-cash items including foreign exchange losses of US$7.7 million and an impairment of US$5.9 million.
Balance sheet
Orocobre's balance sheet remains strong with cash and cash equivalents of US$195 million at 31 December 2019. This is down from US$279 million at 30 June 2019, with the decrease mainly due to funding the stage 2 expansion of the Olaroz facility, which is 25% complete. Loans and borrowing decreased due to the impact in local funding resulting from foreign currency control measures.
Outlook
Orocobre expects Olaroz FY20 production to be at least 5% higher than FY19, while Q3FY20 product pricing is expected to be at least US$5,000 per tonne.
Lithium prices are lower than previous periods but long term fundamentals remain intact. An operational and cost improvement program is clearly defined and currently being implemented.
