Orocobre 2020 Annual General Meeting Transcripts - Seite 2

Review of Performance

Our financial performance reflected the difficult lithium market conditions with persistent oversupply and weak prices. In the second half of FY20, COVID-19 made the situation worse with lithium supply remaining resilient while battery and electric vehicle manufacturing was reduced. In response to these external factors we reduced our production rates and brought forward planned maintenance activities.

The weak lithium pricing environment saw revenue declining year on year by US$67.5 million to US$77.1 million and a net loss of US$67.1 million being reported after impairment and foreign currency losses of US$44.8 million, compared to a profit in the previous year of US$65.4 million.

Advances in productivity at Olaroz have been overshadowed by COVID-19. There is no doubt in my mind that at February we were on track to achieve a record year for production. However, despite falling production in the final months we have achieved improved operating metrics such as brine feed grade, recoveries and reagent usage. A strong focus on fixed costs, minimising the use of contractors and eliminating non-essential spend contributed to a 22% reduction in unit cost of sales from Q1 FY20 to Q4 FY20.

Quality improvements are being reflected in better process reliability, the introduction of the world recognised Toyota Production System concepts, reduced unplanned maintenance events, increasing proportion of purified production and growing confidence amongst our customer base. These improvements in quality resulted in all customer product deliveries in FY20 being within required specifications.

Growth Opportunities

We remain confident that the continued electrification of transport will underpin the Olaroz Stage 2 expansion and the Naraha Lithium Hydroxide Project. These growth initiatives were endorsed by the signing of the MOU with PPES, the Toyota Panasonic battery manufacturing joint venture, in August. The Olaroz expansion slowed due to COVID-19 restrictions and regrettably this will mean a delay and an unavoidable 10% increase in the previous estimate of the capital cost.

Growth has also been achieved with the acquisition of Advantage Lithium during the year which effectively doubled our JORC resource base. The Cauchari resource sits adjacent to the southern boundary of Olaroz and provides options for both future development beyond the current Stage 2 expansion and more effective basin management.