Orocobre: update to pricing expectations

Canaccord recently increased the valuation for Orocobre (ORE.AX) from A$4.20 to A$5.15 following revisions to our Lithium Carbonate pricing forecasts. Since then, the company has provided product specification data, which suggests that up to 86% of recent production was achieving battery grade (>99.5% Li) specs, with the balance being technical grade (99.5% Li). Higher spec drives higher sales price. The company update also included updated product pricing expectations, with US$10,000/t now anticipated for Q3'16. This is against guidance for US$7,500/t for JunQ'16. We currently model benchmark min 99% Li product at US$8,000/t for the remainder of CY16. Orocobre has also provided an updated project timetable for the planned expansion of production capacity to 35ktpa. The schedule calls for completion of studies by early 2017, with permitting and financing anticipated to be completed by Aug'17. Construction is currently earmarked to take 15 months, with commissioning and first production by mid'18. This timetable is somewhat more aggressive than our current modelled assumptions. Livewire subscribers can see our update note here: (VIEW LINK)