The Orocobre Limited (ASX: ORE) share price has risen by 175% over the last year. Could the lithium miner be about to charge higher?
Orocobre is a lithium miner with its Mt Cattlin operations and it's an established producer of boron. In partnership with Toyota Tsusho Corporation (TTC) and JEMSE, Orocobre has built and is now operating the world's first commercial, brine-based lithium operation constructed in approximately 20 years, according to the company.
It has the Olaroz lithium facility in Argentina. Orocobre and TTC have commenced construction of a 10,000 tonnes per annum (tpa) lithium hydroxide plant in Naraha, Japan. The construction of this Naraha plant will "further cement Orocobre's position as a global lithium chemicals producer operating at the bottom quartile of the lithium cost curve".
Could the Orocobre share price be a buy?
There are some analysts that are pretty positive about the lithium miner. For example, Citi and Macquarie Group Ltd (ASX: MQG) both rate the lithium miner as a buy.
Both of the brokers noted the performance of Mt Cattlin production in the quarter update for the three months to September 2021. The Mt Cattlin performance was good, though Olaroz was not as strong as expected.
Quarterly update
The lithium ASX share said the three months to 30 September 2021 was another record quarter, with 67,931 dry metric tonnes (dmt) of production from Mt Cattlin. This was in line with customer requirements at a unit cash cost of US$351 per tonne.
It shipped 89,640 of product, with a realised average price of US$779 per tonne, generating revenue of US$69.8 million.
Orocobre said that contracting arrangements are well advanced for further shipments of around 38.5kt in the December quarter and around 25kt in early January 2022 with a target grade of 5.7%. The average pricing of these shipments is approximately US$1,650 per tonne, almost double that in the quarter ending 30 September 2021.
The price a commodity business can sell its resource at can have a major impact on the Orocobre share price.
At Olaroz, 2,802 tonnes of lithium carbonate were produced, 58% of which was battery grade and exceeded the budgeted target of 50%. Sales amounted to 2,622 tonnes at a price of US$9,341 per tonne, generating revenue of US$24.5 million. Expansion works at Olaroz have reached 60% completion.
Management noted that the lithium carbonate sales price has increased by more than 200% in the last year and guidance for the December quarter has been revised upwards to around US$12,000 per tonne.
Construction is virtually complete at the Naraha plant and pre-commissioning works are underway. Early construction and procurement at Sal de Vida continues. The feasibility study works and basic engineering at James Bay are in the final stages.
Is the Orocobre share price good value?
Macquarie currently has a price target on Orocobre of $12. The other broker I mentioned, Citi, has a price target of $11 on the business.
