From seeking Alpha...

From seeking Alpha

http://seekingalpha.com/article/262...the-production-will-start-this-month?uprof=46

Update: All Is Good At Orocobre's Olaroz Project And The Production Will Start This Month
Nov. 2, 2014 1:47 AM ET   |  About: Orocobre Ltd. (OROCF) by: The Investment Doctor
Disclosure: The author is long OROCF. (More...)

Summary

• No surprises in Orocobre’s quarterly report and the company has now confirmed it will ship its first batch of lithium before the end of the year.
• The borax activities were cash flow positive in the third quarter, and my attributed value might be understating the real value.
• The investment thesis doesn’t change, Orocobre is worth 25-30% more than today’s market cap.

In what could be Orocobre's (OTCPK:OROCF) last quarterly update as a company with relatively low revenues, no sudden problems have surfaced, and despite the (monetary) difficulties in Argentina, the final stages of the construction of the Olaroz project are continuing uninterrupted. The project should be fully commissioned and up and running later this month. More importantly, the company has now confirmed my expectation that the first batch of battery-grade lithium carbonate would be shipped before the end of the year.
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It's also nice to see a more extensive update on the company's Borax division as well, which it acquired from Rio Tinto two years ago. The relocation of the chemical plant to the Tincalayu mine has been completed, and this should lower the production cost as the plant will now be fed with the tincal coming out of the mine, thus removing the transportation needs. Even though the main value driver will be the Olaroz Lithium project, it's good to see the Borax division performing well as it produced a record output during the quarter, and I'd expect the total production to be higher in the December quarter now the relocation of the plant has been completed. The borax division was more or less cash flow neutral as the revenues were just slightly higher than the production costs. However, this could also be due to a non-recognized sale which might be booked in the current quarter. I think the semi-annual financials will paint a clearer picture of the borax division's profitability. The production costs are expected to decrease by 10% this quarter and this will compensate for the expected 20% jump in general and administrative expenses.
As Orocobre still has $20M in cash (and this does NOT include the cash held by its Olaroz subsidiary), the company is in a pretty decent shape. The construction activities at Olaroz should be concluded soon, and I'm looking forward to a smooth ramp-up of the lithium production. The share price has increased by almost 18% since my previous article but has come down a bit now. I hope we will see a 'sell on the news' effect when the production will officially start, as I'd like to get my hands on some more cheap shares.
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