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Argentina Lithium Tour - Orocobre Management Team Looks Forward

by:HGB     2020-06-28
On a long trip to the Olaroz factory, I spent some time with Richard Sevilla, CEO of Orocobre (OTCPK: OROCF, in a statement, he summarized the current situation of the Orocobre and the entire lithium supply chain, which is correct for Asian battery manufacturers who are racing to improve global manufacturing capabilities, automakers are also stomping on each other to announce that their lineup is electrified.
Every market segment, from upstream to downstream, is struggling to gain a position in the lithium race, hoping to be the first in the starting line, not the finish line.
For all industry stakeholders, including Orocobre shareholders, the race to achieve electrified may not have started yet.
In fact, the company just announced that they would be on the starting line.
This is the view of the Orocobre management team and it is a clear signal that although the company is only 10 years old, it is still in its early stages and there are still many achievements to be completed.
The current success and stock price growth of Orocobre is not a reflection of the past decade.
In Argentina, the road to business success is long, dark and tortuous.
The company has overcome many obstacles, such as the construction of a commercial factory at 4,000 m in the remote mountainous area of Argentina.
Moreover, the company has been operating under a populist government for seven years, making it difficult to attract the necessary resources to develop lithium assets.
The company needs to develop creative strategies to help access and exit the country in all forms of capital.
In hindsight, the challenge of putting Olaroz into commercial production seems too big for an Australian junior exploration company (see: Argentina cobre-the road to lithium production in Argentina ).
Today, the Olaroz plant plans to produce 14,000 tons of LCE in FY in 2018, up from 2017 deliverables, but still below the nameplate capacity.
Although the company has a clear mind
Starting with the lithium triangle, the company will continue to face tremendous pressure to lead.
A key advantage of Orocobre\'s success in Argentina is its ability to ensure that Toyota Tsusho (OTCPK: TYHOF) became a joint venture partner in the early days.
Toyota was able to bring part of the financing solution to the table, what Sevilla called a \"defining moment \".
Toyota Tsusho is one of Japan\'s largest trading companies and the sixth largest trading company in the world, with the main goal of supporting Toyota Motor (NYSE: TM) through supply chain management of strategic materials and components, auto business (see: Toyota Tsusho gets 100% of sales from Lithium Venture ).
As Sevilla reflected on the past decade, he commented, \"it\'s not going to be a gold project in Arizona, the bank won\'t touch it, so we\'ll look for the right partners \".
In December 2012, the companies reached a financial arrangement to ensure the capital needed to establish Olaroz.
The financing of the project is provided by Mizuho Bank. the maximum financing amount is about $0. 19 billion, which is attractive.
Borrowing costs 5%.
One of several lithium pools at the Seville oz plant (2017 lithium tour) reflects Toyota\'s financing plan, Sevilla said, \"They (Toyota) are financing very quickly and due diligence was signed on 2011, but it worked well before that \".
Looking into the future, these companies are committed to expanding their relationship in Olaroz and moving upstream in the lithium supply chain, with the goal of building a Japanese-based lithium chemical plant, this will consume the materials extracted and produced in Olaroz.
Sevilla smirked, and when he commented on the relationship with Toyota, \"the relationship was established in 2009, a little mutual, and we went to them and they went to us.
We have been together for 8 years, because their relationship has become stronger and stronger over time, and we have walked out of the other side together.
We were together and that made our relationship stronger.
\"The Orocobre management team outlined the future direction of the company through its expansion efforts.
The expansion plan consists of three strategic pillars that are currently being implemented and will continue to be the main driving force for companies and shareholders in the next 12 months (see: the expansion of lithium battery production in the orocobre collection was made in 2018 ).
First, Olaroz will double its annual lithium carbonate production to 35,000 tons.
Second, it is planning to build a lithium hydroxide plant in Japan with an annual output of 10,000 tons.
Lithium carbonate from Olaroz will be used as a direct input to the hydroxide process, which will produce materials directly used for cathode production.
The battery consists of three parts: anode, cathode and electrolyte.
The cathode and positive pole are the positive and negative poles at both ends of the traditional battery connected to the circuit.
Third, the annual portfolio of lithium carbonate produced by Olaroz will receive a 17,500 T battery grade, 17,500 tons of industrial grade, from existing operations, of these, 9,000 tons will be allocated to supply the next hydrogen oxide plant in Japan.
When asked about the decision to invest in Japan in other parts of Asia, Seville provides insight, \"looking forward to the future, Japanese automakers will produce large quantities of electric vehicles in Japan and elsewhere;
The battery material comes from Japan and is shipped to battery assembly plants around the world \".
Japan has been a leader in the lithium battery market since Sony was founded.
The first commercial consumer lithium battery pack was released in the 1990 s.
While China has won headlines in battery pack manufacturing, Japan has built huge infrastructure for lithium battery materials companies that produce materials and components delivered to battery pack manufacturers.
When asked about the location of the plant and the upstream movement, Sevilla commented on the company\'s decision, \"there are cathode manufacturers nearby who need this material\" and \"The demand for lithium hydroxide is expected to continue to grow, there is not enough lithium hydroxide around, so they told me to produce this material.
\"Selling De Jujuy is a local operating company in Argentina (2017 Argentine lithium tour), which will further integrate the company into the global lithium supply chain as a leading chemical production organization.
Compared to $18,000 for lithium carbonate, the price of the hydroxide is about $12,000, which also allows the company to shut down
Take part in your own production at Olaroz.
According to many variables, the Japanese chemical plant can generate $0. 18 billion a year for joint ventures.
Shareholders of Orocobre are now waiting for the company\'s latest news on plans for expansion in Argentina and Japan.
Key data on capital needs, financing structures, government subsidies and the impact on financial results and shareholder values are expected to be published in the near future.
Sevilla calls itself a \"person who loves to develop things\" and an \"explorer\" who is proud of the team\'s achievements in the Andes.
However, his ears are mentioned shortsellers.
The initial start
The listing of Olaroz has brought a lot of challenges, which has aroused fear among the shareholders.
Concerns about potential demand for additional capital and continued losses could lead to dilution by shareholders and eventually a fall in share prices.
This creates a perfect storm.
Sellers, especially those who hold a large stake in the company.
Seville has a certain amount of trouble when it comes to short topicssellers;
He commented that they \"created a Rumor Factory about stories around us, rumors about the need for $0. 2 billion to adjust our pond\" and \"another capital raise \", we don\'t need more money, but rumors will attract us. \"
In the dark days, there are about 20% of the floating bodies short
Sell, bet the company\'s share price will fall.
His tone changed rapidly with a change in severity, \"I don\'t want to be brief.
How do they satisfy their position?
They were far away from the money, \"and as he continued,\" I felt a little satisfied, just a little satisfied, \"a childish smile soon brightened his face.
Using lime during evaporation (2017 Argentine lithium tour), the supply of lithium is simply not able to keep up with demand.
Industry watchers have been calling for more supply than demand for years, but that hasn\'t happened.
In fact, the price of lithium carbonate per ton has risen from about $5,000 to $12,500 in the past few years and is expected to continue to rise in the next few years.
It is clear that Sevilla was challenged by the investment community, and as he spoke, his voice strengthened with authority, \"a year ago they told me that the wave of supply was coming, then in the March, and in the march. Where is it?
\"With primary exploration companies and existing lithium producers touting new capacity plans to enter the market, industry observers are pessimistic about lithium pricing.
The vast majority of projects have not been realized and have since been transferred to junior mining companies.
Sevilla continues to express his opinion on what has happened in terms of supply, although dozens of lithium projects have plummeted, and Sevilla is more optimistic about the current wave of lithium.
When he talked about the changes in the market since 2010, he made an engaging speech
During the 2012 lithium boom, he went on to talk about the macroeconomic environment of the junior, and in fact, Seville has every reason to believe that prices will remain strong in 2018 and beyond.
This is not only a fixed price above $10,000, but also a rising price, which really excites industry observers, especially for companies like Orocobre that are actively producing white metal
Another key trend in the lithium market is the rapid increase in spot prices, which, according to some variables, are reported between $14,000 and $20,000 (see: lithium prices in China hit a record high.
The challenge for Orocobre is how to determine how and how many products are moving in China\'s domestic market.
Is material trading above $15,000 flowing in bulk? How does it flow?
Before the product reaches the end user, is it being touched multiple times, or is it moving directly from the distribution warehouse at these prices?
Of course, the associated costs of products such as transportation, customs, sales and marketing, and warehousing entering China will increase.
If the market is still tight, Orocobre may have the opportunity to take advantage of high pricing in China by establishing a direct presence in the Chinese market.
Currently, Sevilla is encouraged by the efforts of the business team, commenting that \"our prices are as good or better as the rest of Chile\'s export products\" and continues with a smile, \"I am very satisfied with our price \".
According to the joint venture agreement, Toyota is an active Marketer of the material and receives a commission, but the return received by the joint venture reflects the market price.
The Rumor Factory sparked a conversation in the market, saying that the materials produced by the company did not get a full market price.
Seville simply denied this and considered it \"not a fact at all\" and referred to the public documents produced by the Chilean authorities on lithium exports.
Starting from the early days of Orocobre in Argentina, lithium carbonate is waiting to be shipped to the global market (2017 trip to lithium in Argentina), and many economic and political factors have changed, for example, the country\'s political environment and the need for white metal that drives pricing.
The company has also learned a lot about building lithium brine extraction and processing facilities.
Some of the learning curves that Sevilla calls \"learning how to operate\" are costly for shareholders, but are now behind the company.
With regard to the expansion of the second phase, the company has been licensed and does not need to invest in another purification circuit, what Sevilla calls the \"most challenging part \".
With the expectation of the management team and shareholders, it is gratifying to know that these lithium projects are very technical in nature, which brings a lot of challenges, and this is what is behind Orocobre now.
The hardest part of Olaroz\'s Orocobre is financing, building and operating facilities, all of which are now completed and are planning to rapidly expand the production and output capacity of the facilities.
To put it simply, Sevilla believes that the next phase is not as complex as it has been in recent years, commenting that \"expansion is always easier than Construction \".
I am/We are long OROCF.
This article was written by myself and expressed my views.
I have not received compensation (except for Seeking Alpha ).
I have no business relationship with any stock company mentioned in this article.
Editor\'s note: This article discusses one or more securities that are not traded on major US securitiesS. exchange.
Please note the risks associated with these stocks.
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