prius-battery

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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Asia Races To Lock Up Lithium Supply Ahead Of Major Battery Ramp-Up

Summary

  • Lithium batteries have dominated the consumer market while new applications such as electric vehicles propel future demand.
  • Asian companies race to lock up lithium demand while they increase their battery output capacity.
  • Asia has been forming strategic alliances, joint ventures, and acquisitions with lithium exploration companies worldwide.

Lithium has been one of the cornerstones of success for the mobile phone, smartphone, laptop, and tablet PC markets over the past decade. Lithium batteries for consumer electronics is an area that has seen significant growth due to population increase, increase in buying power in developing countries, and price decrease in electronics. Lithium ion batteries are at the core of many consumer electronic devices for their ability to withstand memory effects, slow discharge when in standby, safety features, and high energy density. The true tipping point for lithium-based batteries will be found with the widespread adaption of hybrid, plug-in-hybrid and full-electric vehicles, coupled with the growing need for utility-scale, grid-tied energy storage.

Asian manufacturers, which have traditionally dominated the global market for lithium ion batteries covering a variety of electronic categories, are leading the next wave of investment into production capacity. With production capacity comes the need for lithium carbonate equivalent (LCE), which is the raw material input for lithium ion batteries. Demand for LCE will grow from 129,000T in 2011 to 498,000T in 2025. The following graph illustrates the growth of lithium batteries with relation to lithium carbonate:

Lithium supply security has become a top priority for Asian technology and manufacturing companies. Strategic alliances, joint ventures, joint ventures and acquisitions, continue to be established with lithium exploration companies worldwide. This will ensure a reliable and diversified supply of lithium for Asia’s battery suppliers and vehicle manufacturers. With lithium carbonate being one of the lowest cost components of a lithium-ion battery, the issue that Asian companies are addressing supply security attained which can be achieved by acquiring lithium from various lithium producers. These measures have been ongoing since 2009 which has seen Asian companies establish joint venture and acquire existing producers. These strategic moves have allowed battery and vehicle companies to alleviate the possibility of future lithium supply disruptions, which could have devastating consequences in a well-established and productive HEV, PHEV, and EV industry. Consider that both Korea and Japan, who are amongst the largest producers of lithium ion batteries have no lithium hard rock or salar brine deposits within their borders.

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