ORE 4.01% $3.35 orocobre limited

Good questions, BytheHorns. "So basically, if they have 'Prime'...

  1. niu
    1,536 Posts.
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    Good questions, BytheHorns.
    "So basically, if they have 'Prime' product on hand there shouldn't be any reason why they can't run it through the purification circuit to produce the higher spec 'purified' BG product ?"
    I'm with you on that - it doesn't seem particularly logical. There is some linkage between the two circuits with some heat exchange but apart from that, if they have Prime product then it should be able to be purified. I'm not sure why they are saying otherwise - Martin with the training wheels still on, perhaps?

    "Previous comments and info in releases has the product mix around 50/50 split so it appears this is not the case and explains why they are a long way off the pricing SQM & ALB are getting ($12-13k USD per ton)."
    I believe the percentage has been quite variable - if I recall correctly it was stated as being well over 50% in the Sept Q last year (pricing was 14,699) and then they flagged that BG would be a lower percentage (around 50/50) in the Dec Q which has been compounded with lower pricing in the primary grade. Lower percent again in the March quarter and heading for just 15% BG this quarter.
    The SQM/ALB prices may not be comparable, even for the same grades, as ORE are reporting prices nett of agency fees, international freight, insurance etc. I'm not sure of the SQM/ALB reporting basis.

    "sure if others recall, but I remember the last call RS conducted he didn't want to go into the make up of the pricing mix when asked to provide clarification/explain the sharp decline in price last qtr. When prompted he stated that they have always given an average realised price across their sales and don't intend to change that, I think mentioning 'commercial sensitivity' as justification."
    I don't have a problem with that. If I was a buyer, I would be delighted for them to have presented that information openly before sitting down to the next contract negotiation...

    "when asked about the purified BG product output they made mention of the product qualification process that takes several months which implies they don't have existing customers for their 'purified' product, instead they are trying to bring new customers onboard..??"
    Like you I found it a little odd that they should discuss the qualification process, given they have been supplying BG customers for a long while. I looked back and they were supplying the first of five qualified BG customers in Feb 2016. A year later they were talking 33 customers all up (but I cannot see how many were BG) and then by October 2017 they were more than 70 customers. What is well understood, is that they found themselves in a sweet spot where the margin on BG was no higher (maybe less) than the margin on Primary. Once it became very easy to sell Primary did they back off on growing the number of BG customers in order to optimise profit? Did they land and then lose some BG customers, for whatever reason (could just as easily be for delivery or price, as much as it could be for quality)? Or did they simply not contract BG volume when they had the chance and now that Primary grade pricing has slumped, they are scrambling to build the BG base with customers that have locked in volume elsewhere? If so, they dropped the ball in a big way.

    Longer term I am not at all worried about demand and price.
    1. On recent travels through international airports, I have admired the Audi E-tron, BMW i-8, Jaguar i-Pace, etc, and not an ICE in sight. The Europeans are coming... even if they have had to slow production due to lack of batteries
    2. Current pricing is putting a damper on investment decisions which will inevitably constrain supply growth, making the next peak even sharper.

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