Morgans Financial Limited

With production at 53% of nameplate capacity in the March 2016 quarter, the Olaroz Lithium Carbonate operation achieved cashflow breakeven. Guidance is for 3,000t of LCE (70% of nameplate) in the June quarter and nameplate of 4.375t of LCE for the September quarter. Orocobre now projects US$7,500/t for LCE in the short term, and market commentary suggests this could be a medium to longer term price. Following the achievement of cashflow breakeven, continued successful ramp-up of production with product meeting specification, and the more 'market friendly' policies of the current Argentine government we have reduced our discount rate to 9.8%. Continued weakness of the Argentine peso has resulted in us reducing projected operating costs, and the stronger price for LCE as well as our use of higher forecast prices has increased margins. With management having demonstrated the ability to meet product specifications, ramp up production, the capacity of the plant confirmed and now better than cashflow breakeven, market confidence in Orocobre is building. As a result, our price target increases significantly, and we upgrade our recommendation to ‘Add’. (VIEW LINK)


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