Orocobre (ASX:ORE) share price rising after bumper quarter for lithium prices

Orocobre shares are edging higher on the company’s quarterly results

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The Orocobre Limited (ASX: ORE) share price is trading higher on Friday after the company released its September quarterly results.

This marks the company’s first results announcement as a combined entity following its merger with Galaxy Resources Ltd.

At the time of writing, the Orocobre share price is up 1.11% to $9.12. However, it has been as high as $9.16 and as low as $8.88 during a topsy-turvy day so far.

Mt Cattlin upgrades production forecast

The Mt Cattlin project in Western Australia achieved record production rates of 67,931 dry metric tonnes (dmt) of spodumene concentrate. That is in line with customer requirements at a unit cash cost of US$351/t.

Encouragingly, the company upgraded its forecast production for CY 2021 to 210,000-220,000 dmt of spodumene concentrate, up from its previous guidance of 195,000-210,000 dmt.

Forecast cash costs were also revised down to US$390-420/tonne. That’s an improvement against its previous guidance of US$420-450/tonne.

It looks like the upgrades have been enough to push the Orocobre share price into positive territory this morning.

During the quarter, 89,640 dmt of spodumene concentrate was shipped at an average grade of 5.7% and an average sales price of US$779/dmt inclusive of cost, freight, and insurance (CIF).

Looking ahead, the average pricing shipments in the December quarter and early January 2022 is approximately US$1,650/tonne CIF for grades of 6%. That is more than double that of September quarter prices.

Olaroz lithium facility lifts production, expansion on track

Orocobre’s Olaroz facility in Argentina produced 2,802 tonnes of lithium carbonate. A total of 58% of production achieved battery-grade status, exceeding the budgeted target of 50%.

Sales volume was up 3% quarter-on-quarter, but down 23% against the prior corresponding period (pcp). This reflects a decision in 2020 to reduce excess inventory during a time of weak lithium spot prices and COVID-19-related uncertainty.

Total sales revenue was up 13% quarter-on-quarter and up 133% on the pcp, reflecting surging lithium demand and tight supply.

The company achieved average sales prices of US$9,341/tonne during the quarter. This compared to US$8,476 in the June quarter and US$3,102 a year ago.

December quarter pricing is anticipated to be approximately US$12,000/tonne free on board at similar sales volumes as the September quarter.

Cash costs jumped 20% on the pcp to US$4,754/tonne. This was due to lower production volume, higher labour costs, and also the devaluation of the Argentine Peso.

Olaroz’s Stage 2 expansion has reached 60% completion. The company expects this project to be completed during the first half of CY 2022 with production to begin in the following half.

Orocobre share price boosted by rising lithium prices

The Orocobre share price has ballooned this year thanks to the bullish momentum behind lithium spot prices.

“Demand for lithium chemicals and spodumene concentrate increased materially during the quarter in all key geographies responding to sustained high production of lithium-ion battery materials and batteries,” the report said.

Another factor driving lithium demand was the electric vehicle industry. Production between January and August 2021 jumped 150% compared to a year ago.

From a supply perspective, Orocobre flagged that “supply from lithium brine and spodumene producers is estimated to be at least 3% less than the projected demand volumes in 2021”. The supply deficit is forecast to increase to more than 20% over the next five-year period.

Orocobre share price trading sideways

The Orocobre share price has been trading sideways since mid-October, perhaps taking a breather after doubling year-to-date.

Orocobre shares have since struggled to break above the $10 mark, but are bouncing strongly when approaching the low $8s.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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