Originally posted by savvyinvestor
sorry ive been busy and just finally had a chance to sit and read through the thread. i read the quarterly at the time of release and wasnt worried although i thought the low headline production number would shake a few weak hands loose of some nervous holders who saw further red ahead and wanted ti cut their losses.
the future as i see it:
1. ore will still hit guidance of higher production than last year and around 13,000 is a realistic goal in my mind.
2. prices are amazing, considering all the media rubbish over the past 6-9 mo ths about lower lithium prices im surprised holders on this thread were not more excited about averaging 15,000/t usd, ie around 22,000 aud. put that in your pipe and smoke it MS. yes they are forecast to drift lower in next quarter but they will still be 13,000+ so the margins are still incredibel
3. costs were up due to lower production, maintenance etc but this will be lower next 2 quarters back to around 4,000/t due to higher production rates, and gross margins should thus only be slightly lower (ie still >70% which is beautiful)
4. yes some of this is more luck than skill for orecobre but i would like to think that as a lithium investor i had strong conviction that lithium production would be constrained and demand strong, so i think those of us who held strong and didnt buy the hype from shorter manipulators should give ourselves a pat on the back, as thats not luck its from our own research;
5. ore has had production issues and approval delays, but guess what so has: galaxy, minres, kidman, altura, etc in australia and more importantly so has sqm and alb in the atacama, with their ongoing water permit issues, tax/ govt issues and the complexity of brine mining being a headwind for those two monster producers. chinese spod converters are not showing signs of ramping up yet and chinese cheap brine will tail off over the next 6 months as they enter winter with low evap rates. so both short term and medium term we are seeing lots of reasons across the global lithium sector that supply will remain tight.
meanwhile on the demand side there is continued acceleration and the temporary dislocation in chinese auto battery demand (due to the change in incentives towards longer range cars resulting in destocking etc) is now mostly done so demand should pick up in chinese auto as well as across the board. this is good for chinese spot prices and more importantly for seaborne carbonate prices.
6. i agree that ore has not managed the ponds or plant well over the past 4 years and im also disappointed both richard and the board, but i think the lessons learnt should hold us in better stead going forward.
7. i agree communication and explanation has not always been great but perhaps that will improve under the new CEO.
8. ultimately this is a compelling investment as an existing producer in the niche brine sector which is able to capitalise on the excellent cash generation of the current market and is essentially fully funded for phase 2 and a hydroxide plant in conjunction with a highly motivated partner who has strong alignment with shareholder interest given their 20% stake and need to secure lithium for their own auto batteries.
the idea that toyota will cause undue delays and are reluctant to proceed is rubbish imho. i think we will see the fid before christmas and be full steam ahead. im glad toyota is managing the lioh plant as its one less distraction for ore.
i agree phase 1 may never hit nameplate but even if we assume 32-35,000tpa after phase 2, and even if lithium prices moderate from their current high levels over the next 5-10 years, we will see ore will remain a highly profitable business.
if i was toyota i would have offered to have bought the whole thing out at a premium of 25-30% at around a billion (mc was down to around 700-800m from memory at 3.30) because they would have got a few hundred mill back in cash and a business that will likely be producing at least 100m operating cashflow per year going forward.
For me, it's not about nameplate. I have already accepted that they probably won't meet nameplate of 42,000 at least for the first couple of years. So assuming production of 35,000, and margin of $10,000 per tonne, that is 300 million per year. If the price stays were it is, with a market cap of around 1.1 billion, the P/E ratio is a ridiculously low 3.6. In addition, a couple of years of revenue of 300 million might mean dividends, which will allow larger investment firms to buy in as many are restricted on what they can invest in.
I don't think the shorters have gone away, they love volatility and will create it where possible. Every piece of slightly negative news will become fodder for the next shorting attack, but in the long term I see a much higher share price.
