JUNE QUARTER 2020 KEY HIGHLIGHTS1
At the date of this report no cases of
COVID-19 have been recorded at Olaroz, Borax and corporate offices
or sites. The Olaroz Lithium Facility (Olaroz) recommenced
production on 9 April following a closure due to COVID-19
restrictions in late March. Despite lower
operating rates, partly due to our Bio-security Protocol, cash cost
of sales was the lowest achieved for three years at
US$3,920/tonne. Market conditions and product
pricing continued to be challenging with significantly reduced
sales volume of 1,601 tonnes at a price of US$3,913/tonne. Work
continues at the Naraha Lithium Hydroxide Plant (Naraha) while site
operations at the Olaroz Stage 2 Expansion continue at a reduced
pace due to COVID-19 restrictions.
OLAROZ LITHIUM FACILITY (ORE 66.5%)2
- Operational activities have been dominated by planning and
implementing mitigating strategies in response to COVID-19
including the Orocobre Bio-security Protocol approved by local
authorities. Our focus has been on the health and well-being of our
staff, contractors and communities
- Production for the quarter of 2,511 tonnes was down 27% on the
previous corresponding period (PCP) due to the
COVID-19 related temporary plant shut down, reduced operating rates
and the scaling of production to sales demand. Brine
production, pond management and product deliveries continued
throughout the quarter without significant interruption
- Sales volume for the quarter was impacted by COVID-19 and down
36% quarter on quarter (QoQ) to 1,601 tonnes,
while sales revenue was down 48% QoQ to US$6.3 million. The
realised average price achieved after price adjustments was
US$3,913/tonne on a free on board basis (FOB)3
with continuing weak demand and aggressive competitor pricing.
Sales volumes were approximately 29% battery grade lithium
carbonate and the remainder primary grade lithium carbonate
- Cash costs for the quarter (on cost of goods sold basis)4 were
US$3,920/tonne, excluding the export tax of US$151/tonne and
COVID-19 related costs of US$940,000 related to the temporary
shutdown and other support measures. While this cost result was the
best achieved for three years, work continues to further improve
the operating margin
- Operations continue to enforce bio-security measures and daily
monitoring of employee and contractor health with contingency
planning in place should COVID-19 be detected within the workforce.
Planned maintenance has been brought forward to mid-July to reduce
the potential exposure given the recent growth of infections in the
local area
LITHIUM GROWTH PROJECTS
- A significant review of the Olaroz Lithium Facility Expansion
(Stage 2) has determined that total capital
expenditure will increase from US$295 million to approximately
US$330 million (excluding working capital and VAT). Orocobre’s
share of the increase will be funded from the previously announced
US$135 million cash guarantee. The increased capital
expenditure estimate includes the impact of design optimization and
COVID-19 delays
- Construction work on Stage 2 was severely impacted during the
quarter by COVID-19 restrictions. Construction ceased in late
March and recommenced on 29 April. Site works continue to be
limited and project construction has only progressed slightly from
the end of March to approximately 40% completion. The number of
employees on site has been reduced to manage the COVID-19 risks in
accordance with Orocobre´s Bio-security Protocol and local
authority regulations resulting in further delays to Stage 2
completion while these restrictions continue
- Naraha Lithium Hydroxide Plant construction has continued
throughout the period. However, equipment deliveries from overseas
are expected to be delayed due to COVID-19. This is likely to
impact the final project completion by approximately two
months. Construction has achieved approximately 70%
completion
BORAX ARGENTINA
- Overall sales volume for the June quarter was 12,278 tonnes, up
4% QoQ and 15% up on PCP. Operations were temporarily suspended due
to COVID-19 restrictions as previously advised; however, production
recommenced on 9 April operating within the Orocobre
Bio-security Protocols
- Sales revenue was up 3% QoQ, however the average price received
was down 10% QoQ due to seasonal sales of low grade minerals for
the Brazilian fertiliser market.
CORPORATE
- As at 30 June 2020, Orocobre corporate had available cash of
US$154.9 million of which US$11.1 million and US$36 million
have been set aside as guarantees for the Naraha debt facility and
the Stage 2 debt facility respectively. Including SDJ, Borax and
Naraha cash and project debt, net group cash at 30 June 2020 was
US$44.6 million, down from US$64.7 million5 at 31 March 2020, due
to Stage 2 funding, Stage 1 net operating outflows, financing
costs, debt repayments across the Group (and the inclusion of
Naraha debt facilities)
- Agreement has been reached with Toyota Tsusho Corporation
(TTC) whereby up to US$60 million from the US$135
million that was previously required to be restricted as a cash
guarantee for the Stage 2 Mizuho loan can be used for Olaroz Stage
1. If required, these funds will be used for Olaroz related costs,
scheduled debt repayments and to provide additional funding
contingency due to the uncertain impact of COVID-19
restrictions
- The remaining US$75 million of the guarantee funds plus
any of the unused US$60 million, will remain restricted as a cash
guarantee for the Stage 2 Mizuho loan. These funds will be
available for Orocobre’s share of the US$35 million Stage 2 capital
cost increase detailed above, any further Stage 2 cost overruns,
VAT and working capital. If capital expenditure exceeds US$330
million, Orocobre will be required to solely fund this overrun by
way of shareholder loans
- Orocobre expects to recognise a non-cash, pre-tax impairment
charge of approximately US$28 million in its FY20 annual results
based on current information and in accordance with the relevant
accounting standards as detailed in the Corporate section of this
report. The impairment assessment calculation is ongoing and will
be completed as part of the preparation of Orocobre’s FY20 audited
financial report
- The acquisition of Advantage Lithium Corp.
(Advantage) was completed during the quarter.
Personnel and resources are currently being integrated with Sales
de Jujuy. As a result of this acquisition Orocobre’s resource base
has increased by 4.8 million tonnes (Mt) of Measured and Indicated
Resources and 1.5 Mt of Inferred Resources (expressed as lithium
carbonate equivalent) at Cauchari as detailed in the Orocobre ASX
Release dated 7 March 2019.
OLAROZ LITHIUM FACILITY
Click here for more information on Olaroz
COVID-19
Operations at Olaroz ceased on 20 March 2020 as a result of the
Argentine Government’s enactment of Decree of Necessity and Urgency
(DNU) #297/20 related to COVID-19 and reinforced pursuant to Decree
#520/2020.
Production recommenced at Olaroz on 9 April 2020 following the
specific declaration by the Argentine Government of Orocobre
operations as “essential” activities.
Brine production, pond management and product deliveries were
maintained throughout the restrictions and general production
recommenced during April with a minimal workforce. Operations have
continued throughout May and June with the reduced workforce and
restricted volumes of brine processed through the plant.
Expansion activities also recommenced during April but with a
limited workforce.
The Orocobre developed Bio-security Protocol continued to be
enforced at our operations in accordance with established national
and provincial regulations.
Orocobre established an emergency committee comprising both
Sales de Jujuy and Borax Argentina to coordinate operations,
enforce the application of the Bio-security Protocol and review and
update it as needed. The committee analyses possible
scenarios in response to changing circumstances and coordinates
with local health authorities, local communities and the Provincial
Governments of Jujuy and Salta.
Subsequent to the end of the quarter, new infections of COVID-19
have been recorded at nearby operations and in some local
communities. This has reinforced the need to maintain strict
adherence to the procedures and personnel rosters that have been
established.
Daily monitoring of workforce health continues throughout 14 day
rosters that apply to all personnel and include those employees who
would normally reside in local communities. Isolation procedures
have been developed should personnel become unwell and plans are in
place if COVID-19 infections are identified at site.
Results to date demonstrate that there is no evidence of
circulation of COVID-19 in any of Orocobre’s operations based on
more than 400 negative tests performed on staff at Sales de Jujuy
and Borax Argentina.
SAFETY
Safety (and health) remains the number one priority for the
Company. Zero Lost Time Injuries were recorded at Olaroz during the
quarter. As at 30 June the operations recorded 160 days without a
Lost Time Injury (LTI).
The Company has continued to focus this quarter on the
implementation of the SICOP contractor management system. SICOP
serves as a centralised control system which provides real-time
visibility of contractor certifications, compliance and performance
in accordance with established standards and regulations. The
safety team is also developing a Contractor Safety Management
standard to pre-qualify contractors and evaluate their performance
with a strong focus on procedure compliance and safety
practices.
The Dupont programs continue to enhance our safety culture and
remain a key priority even during the current COVID-19 situation.
In parallel, the Intelex Safety Management database went through a
detailed scope revision and was re-defined according to corporate
objectives. It should be fully implemented by the end of Q1
FY21.
Lagging indicators and key leading indicators have been
identified and defined to measure and improve safety and
environmental performance.
OPERATIONAL UPDATE
QUALITY
Despite operating with reduced staff as a consequence of current
COVID19 restrictions, plant stability and reliability has improved
resulting in a decrease of unplanned maintenance events and repair
turnaround time. Plant yield and lithium recovery also
improved.
Kaizen activities have been implemented in coordination with a
Toyota team by applying the TPS concept (Toyota Production System).
Kaizen is a highly successful continuous improvement process
utilised in the Japanese manufacturing industry. While it is still
early in the implementation process, results have been positive
with a noticeable change in the mindset of our operational
personnel.
Maintenance scheduled for August has been brought forward and
commenced in mid-July. This work is planned to be completed
entirely by internal staff and resources to minimise costs. It is
expected that operations will cease for up to three to four weeks
while maintenance tasks are undertaken. Expenditure on parts and
equipment is anticipated to be less than US$1 million. Sales will
be made from existing inventories during this period.
PRODUCTION
Production for the June quarter was 2,511 tonnes down from 3,455
tonnes on the PCP due to COVID-19 related operational restrictions
and the scaling of production in response to reduced sales demand.
Lower throughput rates have enabled our teams to perform various
operational improvements that have delivered lower operating costs
partly offsetting the impact of reduced production on unit costs.
These learnings will be incorporated into future operating
practices.
SALES AND COMMERCIAL
Product sales were 1,601 tonnes of lithium carbonate with an
average price of US$3,913/tonne on an FOB basis and total sales
revenue of US$6.3 million. The average price received during the
quarter was down 19% QoQ due to significant market softness related
to COVID-19 and continued aggressive competitor pricing. As
previously noted, the pandemic has delivered accelerated investment
by some jurisdictions into electric transportation which should
have medium to long-term benefits but it remains unclear when this
will be reflected in lithium chemical prices.
COSTS/MARGINS
Cash costs for the quarter (on cost of goods sold basis and
excluding COVID-19 costs) were a three year low of US$3,920/tonne
and down 13% on PCP. This excludes US$940,000 of COVID-19 related
costs and US$151/tonne of export duties for the quarter. Gross cash
margins for the quarter were breakeven (excluding COVID-19 costs
and export tax), down approximately US$800/t QoQ and US$3,700/t on
PCP. COVID-19 costs include those related to the temporary
shutdown of operations, donations of equipment and other community
and provincial support.
Metric |
June quarter
2020 |
March quarter
2020 |
Change QoQ (%) |
PCP (Jun qtr
2019) |
Change PCP (%) |
Production
(tonnes) |
2,511 |
2,732 |
-8% |
3,455 |
-27% |
Sales
(tonnes) |
1,601 |
2,518 |
-36% |
3,387 |
-53% |
Average price
received (US$/tonne) 3 |
3,913 |
4,810 |
-19% |
8,220 |
-52% |
Cost of sales
(US$/tonne)4 |
3,920 |
3,972 |
-1.3% |
4,493 |
-13% |
Revenue
(US$M) |
6.3 |
12.1 |
-48% |
28 |
-77% |
Gross cash
margin (US$/tonne) |
-7 |
838 |
-101% |
3,727 |
-100% |
Gross cash
margin (%) |
0% |
17% |
-101% |
45% |
-100% |
Export tax
(US$/tonne) |
151 |
181 |
-17% |
572 |
-74% |
Total cost of sales has remained at recent lows despite reduced
sales and production volumes demonstrating the significant focus
and reduction of fixed costs within the operating business. The
improvement in fixed costs is largely due to a reduction in
contractors and consultants use, lower contracted energy price and
site related services resulting from improved commercial agreements
and the elimination of all non-essential spend.
http://ml.globenewswire.com/Resource/Download/70b096a0-0686-4bf6-af55-f954d8ec661b
STAGE 2 EXPANSION AT OLAROZ
PROGRESS TO DATE
A significant review of the Stage 2 expansion project was
completed post the end of the quarter. Capital expenditure for
Stage 2 is now estimated to be approximately US$330 million
(excluding working capital and VAT). Key areas of cost escalation
included COVID-19 related delays, more robust technology related to
the carbonation process, management of impurities in the soda ash
system and improved flexibility in the liming process. As at 30
June, approximately US$139 million has been spent on the first
phase of activities achieving a construction completion rate of
40%.
Agreement has been reached with TTC whereby up to US$60 million
of the US$135 million that was previously required to be restricted
as a cash guarantee for the Stage 2 Mizuho loan can be used for
Stage 1. If required, these funds are for Olaroz related costs,
scheduled debt repayments and to provide additional contingency
funding due to the uncertain impact of COVID-19 restrictions.
The remaining US$75 million, plus any of the unused US$60
million, will remain restricted as a cash guarantee for the Stage 2
Mizuho loan until practical completion for Stage 2 is achieved.
These funds will be available to fund Orocobre’s share of the US$35
million Stage 2 capital cost increase detailed above, any further
Stage 2 cost overruns, VAT and working capital. If capital
expenditure for Stage 2 exceeds US$330 million, Orocobre will be
required to solely fund such overruns under this new agreement by
way of shareholder loans.
Expansion operations ceased on 20 March due to COVID-19
restrictions and only recommenced on 29 April with a reduced
workforce. Amongst other matters Olaroz camp capacity is severely
limited due to social distancing and Bio-security Protocol measures
resulting in further delays to Stage 2 completion while these
restrictions continue.
Work during the June quarter has focussed on the key areas of
brine gathering networks, gathering ponds and main evaporation
ponds.
NARAHA LITHIUM HYDROXIDE PLANT
PROGRESS TO DATE
The Naraha Plant, the first of its kind to be built in Japan, is
designed to convert industrial grade lithium carbonate feedstock
into purified battery grade lithium hydroxide. Feedstock for the
10,000 tonne per annum (tpa) Naraha Plant will be sourced from the
Olaroz Lithium Facility’s Stage 2 Expansion that will produce
industrial grade (>99.0% Li2CO3) lithium carbonate.
Since construction commenced at the Naraha Plant there have been
no LTIs recorded.
As at 30 June, approximately US$40 million has been spent on
engineering, civil works, electrical, instrumentation, fabrication
and procurement at the Naraha Plant. Site operations have
continued throughout the period, however equipment deliveries from
overseas are expected to be delayed due to COVID-19 which is
currently projected to delay final project completion by
approximately two months.
SHARED VALUE PROGRAM AND COMMUNITY
COVID-19 and associated restrictions to movement within the
Province of Jujuy has resulted in many of the Company’s standard
Shared Value initiatives being suspended as the Shared Value team
focused on the design and delivery of new, specific initiatives in
response to COVID-19.
The key priorities for the Shared Value team during the June
quarter included:
- Community Empowerment – working with suppliers to understand
and manage the impacts of COVID-19 on local supply contracts,
indirect employment, and socio-economic resilience of both the
Company’s suppliers and the local communities. With both Operation
and Expansion activity restricted for a period, SDJ focused on
identifying and implementing whatever action could be taken to
reduce the impact on more vulnerable suppliers.
- Community Investment – channelling investment and initiatives
to address the specific needs of communities in the midst of
COVID-19 restrictions. This includes direct aid programs to offer
immediate support to the most vulnerable members of the community,
and strategic capacity building programs to establish small-scale
agricultural product units (household greenhouses) and promote food
security within the communities in the short-medium term.
- Community Engagement – ensuring that channels of communication
remain open despite the physical complications presented by
COVID-19 and the limited connectivity in the region. While travel
and meetings restrictions have impeded any form of face-to-face
engagement with local communities, structured channels of
communication leveraging digital technology have been readily and
effectively adopted by the communities. This has enabled the Shared
Value team to maintain open communication with the communities and
provide important updates (e.g. changes to Biosecurity Protocols)
and training programs (e.g. construction and management of
production units) throughout the lockdown period.
- Giving and Volunteering – coordinating and assuring the
effective use of Company resources in response to COVID-19 both
through donations to local communities and governments, and
volunteering opportunities for employees in specific response
initiatives. Medical equipment and supplies (including testing
kits) were donated to the Ministries of Health in Salta and Jujuy
and the local hospital in Susques, while smaller health and hygiene
items were delivered directly to communities upon request and as
part of the direct aid programs. Employees from the Supply Chain
and Procurement function generously donated their time to support
local suppliers and contractors connect with local government
support services and relief packages.
MARKET
The continued spread of COVID-19 during the June quarter further
challenged the sluggish supply chain. Raw material production
proved more resilient to the pandemic’s impact compared to mid- and
down-stream cathode, battery and electric vehicle
(EV) manufacturing facilities which mostly ceased
production for between two to four weeks. In some cases, the
down-stream facilities retooled for production of medical-related
equipment and masks.
The pace at which downstream operations re-commenced and ramped
up battery and EV production varied throughout the industry
depending on inventory levels and customer order backlogs. Despite
the economic slowdown, the most highly sought-after EV models
continued to gain customer orders but were often not able to fulfil
demand due to logistical constraints limiting availability of
parts.
Despite the extension of China’s EV subsidy program, further
provincial level support programs and an easing of the most severe
COVID-19 restrictions, consumer demand was largely subdued. Foreign
EV manufacturers performed best in China as additional features and
perceived international brand prestige enticed first time EV
purchases and converted traditional buyers of domestic brands.
Weak global demand and build of product inventory saw aggressive
sales pricing by some spodumene and lithium chemical producers
seeking to maintain cash flow, minimise unit costs and/or grow
market share at the expense of price. Growth in supply from some
South American brine producers to the Chinese market increasingly
displaced independent hard rock producers and marginal Chinese
converters. As a result, higher cost Chinese conversion
plants began to idle facilities and/or further moderate
production.
Meanwhile, independent hard rock producers adopted mixed and
contrasting strategies – some continued to follow a lower
production, campaign-based approach while others aimed to maximise
output to maintain unit cost benefits. Overall utilisation rates of
Australian hard rock producers were significantly lower than recent
quarters which aligned with independent Chinese conversion plants
at or below 50%.
During the quarter widespread delays to lithium expansion
projects were announced reflecting market conditions, limitations
on project workforce availability and lower plant and equipment
availability. The prolonged, subdued market conditions have
overshadowed the potential medium- to long-term improvements these
project delays will have on industry pricing and structure. This
will be further reinforced by the extended development times of new
brine production and hard rock conversion capacity.
EV manufacturers were buoyed by positive signals from the
European Union (EU) as member states re-affirmed
‘green’ industries would be used as the platform for economic
recovery post-COVID-19. The EU announced a ‘Green Recovery
Plan’ providing 20 billion Euro’s to projects that would provide
some form of environmental benefit such as lowered carbon
emissions. Notably, two of the largest automotive markets Germany
and France also increased EV subsidies by ~50% and ~17%
respectively, bringing some EV sale prices in line with internal
combustion engine (ICE) equivalents.
Following the easing of COVID-19 restrictions, Germany and
France’s EV sales respectively grew 100% and 50% year-on-year in
May demonstrating the immediate impact new subsidies had on
consumer EV appetite. During the quarter there were further
announcements of battery and EV manufacturing partnerships, and
even retooling of production facilities from ICE production to
EV’s.
On a global basis the lithium market has suffered a setback due
to COVID-19, however the medium to long term outlook remains
positive and continues to be further reinforced with increasing
government regulation and funding.
BORAX ARGENTINA S.A.
SAFETY
Three Lost Time Injuries were recorded at Borax during the
quarter. One at Tincalayu (slip and fall) and two at Sijes (object
falling from height and tripping on a rough surface). Campo Quijano
has now achieved 456 days without an LTI.
One environmental incident occurred at Sijes with approximately
400 litres of hydrocarbons spilled during a trans-shipping
operation. Remediation has since been completed.
PRODUCTION, SALES AND OPERATIONAL UPDATE
The June quarter saw sales of 12,278 tonnes which was up 15% QoQ
and approximately 4% up from the previous corresponding period
after adjusting for low value mineral sales in June quarter 2019.
Total sales revenue was up 3% QoQ, while the average price received
was down 10% QoQ due to seasonal sales of low grade minerals into
the Brazilian fertiliser market.
Operations temporarily ceased in late March due to Argentine
government COVID-19 quarantine restrictions, and following the
declaration of the business as an “essential activity” production
recommenced in April with some ongoing restrictions due to
bio-security measures. Operations have since performed at normal
productivity levels, with good efficiency resulting in lower unit
costs this quarter. No cases of COVID-19 have been recorded at any
Borax site.
COMBINED PRODUCT SALES VOLUME BY QUARTER
Previous Year Quarters |
Recent Quarters |
September 2018 |
9,407 |
|
September 2019 |
12,480 |
December 2018 |
10,741 |
|
December 2019 |
8,614 |
March 2019 |
13,0416 |
|
March 2020 |
10,690 |
June 2019 |
11,758 |
|
June 2020 |
12,278 |
Business development activities were focussed on maximising
sales to specific markets with higher prices and margins. This
process benefited from the profile of Borax as a reliable supplier
with a strong portfolio of products. Many customers of Borax
operate in essential industries such as health and agriculture and
are less affected by current COVID-19 related restrictions.
ADVANTAGE LITHIUM CORP.
During the quarter an annual general meeting and special meeting
of Advantage Lithium Corp. (TSX Venture: AAL) (OTCQX:
AVLIF) shareholders approved a statutory plan of
arrangement under the Business Corporations Act (British Columbia)
(the Arrangement) which allowed Orocobre to
acquire 100% of the issued and outstanding shares of Advantage that
it did not own.
Under the terms of the Arrangement, Advantage shareholders
received 0.142 Orocobre shares per Advantage share. Orocobre issued
approximately 15.1 million shares and increased the total issued
capital of Orocobre by 5.8%.
The valuation of Advantage based on the exchange ratio of 0.142
shares per the transaction will trigger a non-cash impairment
charge of approximately US$6.2M to be recognised by Orocobre on its
investment in Advantage for the shares that it already owned. The
impairment calculation will be completed as part of the preparation
of Orocobre’s 2020 annual financial report.
This transaction will allow Orocobre to continue to develop the
Olaroz/Cauchari basin in a cost-effective manner that will optimise
extraction of the resource to the benefit of shareholders, local
communities, the Provincial and National governments of Argentina
and other stakeholders.
As a result of the acquisition Orocobre has increased it
resource base by 4.8 million tonnes (Mt) of
Measured and Indicated Resources and 1.5 Mt of Inferred Resources
(expressed as lithium carbonate equivalent) at Cauchari as detailed
in the Orocobre ASX Release dated 7 March 2019. Defined JORC
Measured and Indicated Resources at Olaroz/Cauchari now total 11.2
Mt of lithium carbonate equivalent and 1.5Mt of Inferred
Resources.
The development of the Cauchari resource will be considered
within future plans for the Olaroz Lithium Facility.
CORPORATE AND ADMINISTRATION
FINANCE
CASH BALANCE
As at 30 June 2020, Orocobre corporate had available cash of
US$154.9 million of which US$11.1 million and US$36 million have
been set aside as pre-completion guarantees for the Naraha debt
facility and Olaroz Expansion debt facility respectively.
The US$8.1 million cash reduction from the previous quarter was
the result of a US$7.6 million shareholders loan made to the SDJ
Joint Venture to fund Olaroz Stage 1 operating and financing costs
due to the low sales volumes impacted by COVID-19, US$1 million of
corporate costs, US$0.3 million of transaction costs related to the
Advantage Lithium acquisition, and US$0.6 million of other project
payments. This expenditure was partially offset by US$0.5 million
interest income and collection of the final payment from the sale
of Salinas Grandes of US$0.9M.
Including SDJ and Borax cash and project debt, net group cash at
30 June 2020 was US$44.6 million, down from US$64.7 million7 at 31
March 2020 as calculated below and after including Naraha
facilities:
|
|
US$ Millions |
|
|
|
ORE Corporate Cash |
107.5 |
|
|
|
ORE Restricted Cash LIOH |
11.1 |
|
|
|
ORE Restricted Cash
Expansion |
36.0 |
|
|
|
AAL |
0.3 |
|
|
|
Total ORE Corporate
Cash |
154.9 |
|
|
|
Net Cash from other
Entities |
0.6 |
|
|
|
TLC Naraha cash @ 75% |
18.2 |
|
|
|
SDJ Cash @66.5% |
10.7 |
|
|
|
SDJ Restricted Cash @
66.5% |
11.4 |
|
|
|
TLC Project Loan @ 75% |
(42.5 |
) |
|
|
SDJ Working capital facilities
@ 66.5% |
(18.5 |
) |
|
|
Mizuho Stage 1 66.5% |
(58.3 |
) |
|
|
Mizuho Stage 2 66.5% |
(31.9 |
) |
|
|
Total Proportional Net
Group Cash |
44.6 |
|
|
Orocobre expects to recognise a non-cash, pre-tax impairment
charge of approximately US$28 million in its 30 June 2020 annual
results. The expected impairment charge relates to the impairment
of Advantage Lithium at the time of acquisition by US$6.2 million,
US$5.2 million of finished goods inventory and US$11.7 million
brine inventory write downs to the net realisable value due to the
prevailing soft market conditions, and other asset write-downs of
US$5 million. The impairment assessment calculation is unaudited
and ongoing and will be completed as part of the preparation of
Orocobre’s FY20 audited financial report. Any additional
adjustments to such calculations will be included in the 30 June
2020 annual results.
ARGENTINA ECONOMIC CONDITIONS
Debt: Negotiation with bondholders continues.
Argentina’s government presented a 4th offer and negotiations
regained momentum with a counteroffer from bondholders. In
addition, the Government unveiled a Debt Swap for Argentine Law
bonds. The current deadline for debt renegotiation is 4 August
2020.
Currency controls: The official foreign
exchange rate depreciated by 9% in the March Quarter from AR$64.47
at 31 March 2020, to AR$70.46 at 30 June 2020, while the average
spread for the blue-chip swap was around 65%. The blue-chip swap
depreciated 35% during the quarter. Foreign exchange controls have
been tightened with new restrictions for importers, individuals,
mutual funds and companies. The accumulated 12-month period from 1
July to 30 June 2020 resulted in a 66% devaluation of the AR$
against the US$.
Inflation: June’s inflation was 2.2% and
accumulated 5.2% in the quarter. Price and public service tariff
controls will remain in place until the end of the year. The
accumulated 12-month period from 1 July to 30 June 2020 resulted in
inflation of 43%, although devaluation and inflation are expected
to generally cancel each other over time.
Fiscal: Fiscal measures were implemented to aid
Provinces and to support private sector employment and production.
The Central Bank assistance to the Treasury totals AR$1.3 trillion
during 2020, 5% of GDP, to cover budget deficits.
Labour: The Government has prohibited the
termination of labour contracts until 30 September 2020 and
extended the payment of double compensation for dismissals without
just cause until December 2020.
Authorised by:
Rick AnthonJoint Company
Secretary
FOR FURTHER INFORMATION PLEASE CONTACT:
Andrew BarberChief Investor Relations
OfficerOrocobre
Limited
P: +61 7 3720
9088
M: +61 418 783 701
E: abarber@orocobre.com W:
www.orocobre.com
____________________________
1 All figures presented in this report are unaudited
2 All figures 100% Olaroz Project basis
3 Orocobre report price as “FOB” (Free On Board) which excludes
insurance and freight charges included in “CIF” (Cost, Insurance,
Freight) pricing.Therefore, the Company’s reported prices are net
of freight (shipping), insurance and sales commission. FOB prices
are reported by the Company to provide clarity on the sales revenue
that is recognized by SDJ, the joint venture company in
Argentina.
4 Excludes royalties, export tax, corporate costs, restructuring
costs and COVID-19 related costs
5 31 March net cash has been reduced by US$23.5
million with the inclusion of Naraha net debt
6 Includes 2,312 tonnes of low value mineral
product
7 31 March net cash has been reduced by US$23.5
million with the inclusion of Naraha net debt
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