Lithium – update on the South American market:

Orocobre’s Rapid Expansion Plans In Japan And The Puna Plateau

Summary

  • Will double production capacity in Argentina and add a processing plant in Japan by 2019.
  • Current assets are delivering meaning cashflow and raising capital through the sale of non-core assets.
  • Well positioned to increase shareholders value over the next years.

In recent weeks Orocobre (OTCPK:OROCF) has provided several updates to the market regarding both the short-term and mid-term strategy which look very positive. The company has outlined several keys points regarding cash flow, lithium production expansion and new ventures in Japan. The company has confirmed that future capital requirements will come from cash flow and joint venture debt rather than printing additional common shares. It is in my opinion, that on the back of these exceptional positive updates, shares in the company represent good upside exposure at C$3.00/share.

Leading the Pact in the Puna Plateau

For a number of years, Orocobre along with a number of other junior explores have been aggressively investing in the Puna Plateau with the hopes to become the next lithium producers. The Puna Plateau is an area of the Andrean Mountains that reaches elevations of 4,000m and spans 1,800km across Argentina, Bolivia, and Chile. It houses the largest proven deposit of lithium, referred to as the “The Lithium Triangle,” and consists of three major salt lakes: Salar de Atacama, Salar de Uyuni, and Salar de Hombre Muerto. The Puna Plateau is referred to as the “Saudi Arabia of lithium” as it holds approximately 70% of the global reserves, making it an attractive area for both junior exploration and large mining companies. However, despite the favorable mineral structure and capital being spent, Orocobre has been the only player to bring new meaningful production capacity to the global arena.

Project Up and Downs

In December 2014, Orocobre announced the official opening ceremony of the Olaroz Lithium Project, which is still amongst one of the few operating lithium brines in the world. Orocobre’s project partner Toyota Tsusho (OTC:TYHOY) has the exclusive off-take arrangements for all the lithium carbonate produced at the Olaroz Project. The project has hit several hard barriers including: currency issues, developing a relationship with the national and regional governments in Argentina, working at very high altitudes, bring all forms of capital into a socialist regime, along with numerous technical and production issues. Since 2013, these challenges have sent the stock and investor emotions on a wild rollercoaster ride.

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August 2019
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