Lithium Watch – Orocobre Criticises Lithium Scepticism

John Robertson

PortfolioDirect

According to The Australian newspaper, Orocobre chief executive Richard Seville has described scepticism around lithium as “overblown”. (VIEW LINK) The newspaper report refers to Orocobre’s lower share price being “due to growing concerns that new and expanded sources of lithium supply could swamp the global market”. The share price has declined 26% over the past two months but is 170% higher than at the low point in sector pricing in late 2015 and higher than on all but a handful of days in its history prior to May. Valuation plays an increasingly important role for companies at Orocobre’s stage of development as speculation about market conditions and project completion gives way to analysis of profit trends. Orocobre is targetting about 17,000 tonnes of lithium carbonate production from its 66%-owned Olaroz plant at a cost of around US$2,500/tonne. A long term market price of US$10,000/t implies a currently generous market capitalisation of 7.3 times its share of future, as yet unachieved, operational cash flows. Near peak iron ore prices in 2011, BHP Billiton was priced at 4x its realised operating cash flows.


John Robertson
John Robertson
PortfolioDirect

John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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