At time of writing, shares of lithium miner Orocobre Ltd [ASX:ORE] are sitting at $3.76, which is up 1.35% from yesterday.
The past week of trading has seen no drop in the company’s share price, with Tuesday showing a notable 4.7% increase.
Today, the company announced an update on the Cauchari Lithium Project in Argentina — their joint venture with Advantage Lithium Corp [TSX:AAL].
Cauchari in next stage
Orocobre owns about a third of Advantage Lithium’s issued capital, and 25% of the joint venture.
About a month ago, Cauchari’s resource estimate was doubled due to positive results in the phase 2 and 3 drilling programs.
Orocobre MD and CEO Martin Perez said at the time:
‘Our joint venture partners, Advantage Lithium have delivered a well-designed and executed resource definition program that has more than doubled the total Cauchari resource.
‘This result provides an opportunity to reassess future development options to maximise value for shareholders.’
Today, such ‘future development’ was confirmed, with an announcement that Advantage Lithium will undertake a Pre-Feasibility Study (PFS) on Cauchari.
As per the announcement:
‘Given the significant increase in resource size, the PFS will examine various alternatives to unlock additional value compared to the results from the 2018 Preliminary Economic Assessment.
‘A key outcome of the PFS is expected to be the delivery of a mineral reserve backed by an economic analysis…demonstrating the viability of the project.
‘The PFS will consider all production alternatives and will select an optimal development path.’
The PFS is expected to be completed by Q3 FY19.
The future climate for lithium stocks
Demand for lithium continues to grow, while a new supply is yet to come about. Also, average prices on the mineral are up year-on-year if excluding China.
Higher cost hard rock lithium is expected to be the target material of most consumers in the next couple of years, which could shoot up lithium miners’ profits. The current market share of hard rock lithium is 48%, and is expected to grow to 68% by 2025.
That said, financial brokerage firm Canaccord Genuity believe supply will be in constant struggle to keep up with demand in the long-term. This could only be helped with higher prices to lift equities, which may not happen.
That’s why Canaccord Genuity prefer low-cost projects, like Orocobre, over pure-play concentrate producers, as they are less affected by pricing pressure.
However, it may be worthwhile to watch this stock a little while longer to see if the company can regain some ground on one-year returns, which is currently down around 20%.
For Money Morning