Orocobre Ltd. [ORL-TSX; ORE-ASX] says lithium prices appear to have bottomed and are expected to move higher in early 2021. The forecast is contained in the company’s latest quarterly report.
Investor interest in the lithium sector is because the metal is a key ingredient in lithium-ion batteries that are used in electronic devices, smart phones, laptops, and electric vehicles (EVs).
It is anticipated demand for vehicle battery metal will increase sharply over the next several years as automakers abandon internal combustion engines for EVs.
Brines (in salt ponds) and spodumene (hard rock) are the two main sources of lithium.
Orocobre’s key asset is the producing Salar de Olaroz, a large-scale, greenfield brine-based lithium project in northern Argentina. It was built in partnership with Toyota Tsusho Corp. and the investments division of Argentina’s Jujuy Provincial Government. The operation produces lithium carbonate containing high concentrations of lithium and potash brine. Planned production is 42,500 tonnes annually.
Earlier this year Orocobre acquired shares it did not already own in Advantage Lithium Corp., owner of a 75% stake in the Cauchari lithium project 20 km from Olaroz.
Orocobre held the other 25% interest in the Cauchari Project, which contains 4.8 million tonnes of Measured and Indicated lithium carbonate equivalent resource. Measured and Indicated potash resources are 14.9 million tonnes.
“Lithium prices appear to have bottomed and realised [second quarter, fiscal 2021] prices are expected to be higher than [the first quarter],” Orocobre said in its quarterly report.
In the quarter ended September 30, 2020, the company said market conditions and product pricing continued to be challenging with significantly higher sales volume of 3,393 at US$3,102/tonne following discounting of excess inventory in July. Sales volumes were comprised of approximately 22% battery-grade lithium carbonate and the remainder primary grade lithium carbonate.
Orocobre said early signs of improved market conditions emerged late in the quarter. Europe recorded year-on-year EV sales growth of approximately 170% during the September quarter, recovering strongly after COVID-19. It said optimism towards the lithium market was bolstered by the European EV sales, underpinned by supportive policy and subsidisation.
After a year of year-on-year declines in EV sales, China reversed its downward trajectory, recording growth during July, August and September of +23%, +28%, and +73% year-over-year respectively.
“September new EV sales of approximately 138,000 were the highest on record,” Orocobre said.