Ann: Olaroz lithium facility update, page-76

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23/12/18

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Post #: 36946649
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Originally posted by niu ↑

What is Orocobre doing producing technical not battery grade?

BG requires purification in the purification plant and that comes with a higher operating cost. Given the issues they had with ramp up in the purification plant and the fact that they were making pretty much the same margin selling lower grade material, it became an easy option. It seems the product mix has been split around 50/50. This has been a reasonable strategy until now.

The webcast indicated that the BG product price has held up ok but the price for the lower grades has slumped. Given that much of that lower grade material was apparently being used as feedstock for LiOH conversion, the increasing availability of spodumene and low grade carbonate ex Qinghai has presumably depressed pricing. It sounds like much of this lower grade material has been sold via the spot markets so the drop has been abrupt.

I would suggest that it probably means very little in regards to the market for refined Lithium products. The usual pundits indicate are indicating these are very capacity constrained on the supply side and likely to remain so. I am currently travelling in "foggy" Shandong and continuing to hear contacts talking of tightening regulations and increasing enforcement pressure on air quality, so I don't see the China demand side likely to let up any time soon.

Given margins now favour BG, the rational response would be for ORE to rejig the product mix just as quickly as they can place additional BG volumes in to contracts. Longer term, their phase 2 and LiOH strategy is a rejig of the mix - it looks like a 50% BG carbonate, 25% lower grades carbonate, and 25% LiOH mix. If the market for the lower grade material continues to be soft long term, maybe they will bring forward a second LiOH plant or second carbonate purification plant?

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in the recent audio they said they will no longer be selling to the Li hydroxides plants in 2019, not sure exactly what this means in terms of product mix. I think they said spot sales to China represented 25% of total sales, so if the short term contracts are no longer going to China, where are they going ?

ORE Price at posting: $3.00 Sentiment: Buy Disclosure: Held
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Ann: Olaroz lithium facility update, page-76

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