LITHIUM METAL..The new wonder metal which is having the spotlight shone on it, because it is the current metal of choice as one of the metals used in the alloy to make Lithium Batteries. Like everything else once the price gets too high, they just find another metal. The producers of Batteries are always looking for a new way to make long lasting batteries for the least possible price. A Battery in the new low cost Tesla Car Cost $US11,000 and the Car Cost to make $US20,000 total $30,000.
Battery Cost: $US11,000 (lithium)
Car Cost Tesla new budget model: $US20,000
Car sells for : $US37,0000
OROCOBRE: ASX LISTED (ORE)
I have followed this company for a little while and am amazed that the so called analysts in Australia have not challenged the "SO obvious disparity" between the Company Reports and the actual figures used in the Cashflow reports lodged with the ASX on a quarterly Basis.
LATEST QUARTERLY REPORT: (ORE) Q2.
1. Report: Orocobre has produced 2971 tonnes of Lithium Carbonate (increase of 640 tonnes over last quarter) This is GOOD.
2. Average price for shipments $US7,500 (A$10,067) tonne assume $0.745 exchange rate). Quarterly also says: Significant back orders filled. This is GOOD.
OK SO LETS LOOK AT THE FINANCIAL REPORT (We have read how great things are)
1. ORE quarterly says, "2971 tonnes of Lithium Carbonate produced" assume the report above is correct: Revenue should be: $A29,909,396
This is GOOD
2. Report says: Revenue from Lithium for the Quarter: $A5,581,000 (this is equivalent to 653 tonnes of lithium????) What happen to the other 2,318 tonnes produced in the quarter.? This is NOT GOOD.
(Remember the revenue also includes the 9,274 tonnes of Borax Produced by Orocobre's 100% owned Argentina Borax Company. (THIS IS NOT GOOD)
3. Bottom Line: Total Production Costs in Report: $A5,888,000.(without admin costs $A3.5m and interest charges.
4. Take out other costs: Balance was $A2,670,000 loss. This is BAD.
SO SOMEWHERE BETWEEN THE REPORT OF PRODUCTION OF 2971 Tonnes of Lithium @
$A10,067 tonne (Should be revenue of :$A29.9m) we only have Revenue Reported of: $A5.6m in total revenue and that includes the 9,274 tonnes of Borax. Where did the $A23m evaporate to?? This is LOOKING WORSE.
There is no explanation in the report or the financials where the $$$ has floated into thin air. The Company seems to try to illustrate that, "We have so many orders to fill and have just managed to fill all the back orders with this great production, but has no cash to show for it."
IS THIS THE ULTIMATE SMOKE AND MIRROR SHOW.? CHAIRMAN RESIGNS. Says I am 60 years old and leaving to do other things...Considering the latest events probably a good move.
I just wonder why no-one not even the auditors or the ASX or the Great Analysts of Australia have not even bothered to read the report and the numbers. Obviously someone on the 21st July read it and the stock was bombed by a nearly 20% drop. I am not an analyst and don't pretend to be but I do read a lot and compute a lot and this one takes the cake and first prize.
I will leave you with this thought: Every trader knows that the ASX is a Casino, in a casino there a lot games and different games have different catch points, they are all about how to fool the person playing the game.You cant use a computer in the Casino but you can use a computer (algorithm) in the ASX. Go figure.
What is surprising is that ORE was basing the project initially at $US2,500 per tonne for the Lithium Carbonate. The price they are selling for now is $US6,500 per tonne. At $US6,500 per tonne ORE still cant make money, so one might reflect on what might have been if the Lithium market had been as they predicted $US2,500 per tonne. Macquarie has just released a report on Lithium expecting a glut of Lithium onto the market in early 2017 due to the recent price rise surge. If the price of Lithium does fall due to the expected glut then ORE will probably struggle to stay afloat and as a GOING CONCERN,based on their own figures.
Even on their latest figures ORE are going to have to raise cash shortly anyway. The expected doubling of production they estimate at a cost of $US40m will only add fuel to the fire that is currently a smolder but will surely deliver some heat to the bottom line.
Summary and Judgement: It appears that the production is happening, but not at the low cost they were expecting. Plenty of production but obviously not being sold. I think on this one you need to read between the lines. 1. Great Production 2971 tonnes of Lithium Carbonate. 2. Back orders filled. Then look at Revenue: Only $A5.6m in revenue. Can mean only one thing, product either not up to scratch and unable to sell as battery quality product or 2,300 tonnes still in stockpiles. No other explanation. The thing to remember for Lithium and the same for Graphite, both products used in A Grade Batteries. It is not all Lithium and all Graphite that can be used in making of batteries. It has to be a certain specification. In the case of Graphite only 99.8% Graphite Concentrate can be used in Batteries. 90% of producers cant get that quality. It is not the shortage of graphite and lithium making the market rise its the quality of the product that is making it rise because of the shortage of the premium quality to make the batteries. Need to read the fine print and do the DD on these types of minerals and their end use. Another mystery is: Why would the company be looking at doubling the output when: Still losing money at $US6,500 a tonne. Over stockpiled already. Market in oversupply in 2017 forecast. Reason: Raise the $40m to keep the current production alive is my only guess. Doesnt make sense to spend $US40m to double production just to double the losses. Also the bigger the plant the more power required and more costs incurred. They will just create an oversupply. Called exercise in futility. The start of creating their own demise.
