We have written a lot about the lithium miner Orocobre Limited (OTCMKTS:OROCF). We knew that it was a good pick, but we did not expect it to become so profitable.
We hope that our readers still remember our last two articles:
In those reports, we noted outstanding features. The financial statements presented a good situation. Also, OROCF was growing at a healthy pace. Additionally, the recent growth in the demand for lithium was a fair reason to like these names. For starters, lithium is essential for the batteries incorporated in smartphones and electric batteries. Its price has skyrocketed recently.
We commenced our coverage in September 2017. The price was already showing a lot of momentum. Additionally, the volume was also remarkable. More than $0.2 million shares changed hands every day. It looked like a perfect story to be told to our readers.
Check what happened after we published our last two articles. The returns delivered by the company exceeded 120% stock returns:
Let’s check the background of OROCF for starters. Orocobre Ltd. is an Australian mining company. It is focused on building a portfolio of lithium mines in Argentina, listed on the Australian Securities Exchange and the Toronto Stock Exchange.
What did make the share price run? We believe that the following reasons explain the run.
The release of the top 20 shareholders
It is usually difficult to find out the largest shareholders of listed companies. Stockholders tend to hide their positions. So, market opportunities are not revealed to the public.
The case of OROCF is different. OROCF publicly disclosed its top 20 shareholders. Their names were released on November 13, 2017. Check the following table. Do you recognize these names?
Market participants usually put money on a stock only when others have done it too. Thus, in our opinion, some acquired a position as a result of this information.
Additionally, we could read that more shareholders are investing money. The most significant was released on January 18, 2018. Among the shareholders, we found Toyota Tsusho. This company invested as much as A$282 million. It is very positive.
Finally, on February 7, 2018, the company announced that it is looking to raise another A$79 million. The results are expected before February 8, 2018. They may move the market. It will depend on the number of new shares issued.
The market reacted to the capital increase by pushing down the share price. The dilution is the main concern of the market participants. However, if the company can grow at a pace that outstrips the value lost through dilution, then there’s real potential for long-term return.
The Exploration Results
On December 3, 2017, the market got to know the results about the drilling operations on the Cauchari JV property. The most significant were the results from the sampling in the hole CAU16. They showed high grade brine interval averaging 529 mg/l Lithium.
There is more.
The CEO, Richard Seville, noted that the company has found sandy sediments. It is very positive. It indicates that there is both porosity and potential flow rates and brine extraction. This will be very beneficial for future production operations.
On January 18, 2017, more news were received for the CAU15. The brine average was equal to 407 mg/l Lithium. Furthermore, we could read that a lot of information is to be released soon. The drilling on holes CAU12 and CAU13 will soon provide geological information. In addition, CAU17 and CAU18 are being prepared to drill. Finally, pumping tests from CAU08 are also expected.
On February 6, 2018, the market received more news regarding the SE sector. In particular, the results from the pumping tests on the CAU11. They showed brine flow rate of 19 litres per second at 515 mg/l Lithium.
We will be waiting for the next results. High concentration of lithium could make the share price run.
Expected lithium carbonate pricing
As noted in our reports, lithium is in high demand. Thus, prices are expected to run in the future. The company confirmed it on December 17, 2017, in an update on expected lithium carbonate pricing:
“Tight market conditions are expected to result in pricing for the June half 2018 approximately 25% higher than prices received in the December half 2017.” Source
The most important was not that. The important information is that OROCF was able to meet previous pricing guidance for the December quarter of more than US$11,000/tonne.
Currently trading with a market cap of $524 million, OROCF is an exciting story among lithium miners.
As noted, the financials are impressive with the recent Q4 results strong. The most significant was the record quarterly production, which was up by 84% from the September quarter. Additionally, the company celebrated the cash received from investors. With cash on hand, the financing of future growth can continue.
The next shareholders meeting will be held on 26 February 2018. Maybe, the company releases good news to satisfy stockholders. Thus, be sure to check announcements before this date.
Finally, for those who made astonishing returns on the back of our coverage, it may be time to book some profits and re-enter on any selloff.
We will be updating our subscribers as soon as we know more. For the latest updates on OROCF, sign up below!
Disclosure: We have no position in OROCF and have not been compensated for this article.
Image courtesy of Dimitry B. via Flickr