Orocobre Limited (ASX: ORE, TSX: ORL) (“Orocobre” or “the Company”) wishes to provide the following transcript of the Chairman’s Address from the 2018 AGM.
Good morning and welcome to the 2018 Annual General Meeting of Orocobre Limited. My name is Robert Hubbard and I am the Chairman of Orocobre and I will Chair today’s meeting.
I would like to start by introducing my fellow members of the board and the Orocobre executive management team who are with us today. Richard Seville, our incumbent CEO and Managing Director, who is joined by Leanne Heywood, a Non-Executive Director and our joint company secretaries, Neil Kaplan, the Chief Financial Officer of Orocobre and Rick Anthon, the Corporate Development Manager and General Counsel. David Hall, Andrew Barber and other members of the Orocobre management team are also with us this morning.
Kellie McKenzie, a representative of Ernst & Young, the Company’s auditors is also present. This is Kellie’s final AGM as the auditor of Orocobre due to normal rotation requirements. I would like to thank Kellie for her highly professional service over the last 5 years and welcome her replacement, Andy Carrick who is also a partner at EY.
I would also like to take a moment to welcome our incoming CEO and Managing Director Martin Perez de Solay.
As you all know your board is very culturally and geographically diverse with representatives from Argentina, USA, Canada and Japan, in addition to Australia. We have once again decided to minimise expenditure for the meeting and my overseas colleagues on the board are all apologies today.
We have before us today five resolutions for consideration. Prior to consideration of the formal agenda I will give a short address and Richard will provide a presentation on our current status and attractive opportunities for growth. There will be opportunity for questions at the conclusion of Richard’s presentation, however if you have any questions specific to a resolution could you please raise them when we come to that resolution.
The operating environment
In any commodity-based market price can be a volatile thing, lithium is not immune from these cycles and so we continue to focus Orocobre to the bottom quartile of the cash cost curve. The Olaroz average cash operating cost for 2018 was US$4,194/tonne and with ongoing process optimisation and improvements in recoveries, reagent usage and logistics we expect to see our cash operating costs decrease further.
The lithium market experienced strong demand during the 2018 Financial Year encouraged by upward revisions to key forward indicators including the EV plans of car manufacturers, further battery capacity expansions and growing government investment supporting EV uptake and battery storage development.
We believe the overall market trend is for continued robust demand growth particularly for battery-grade lithium carbonate and hydroxide, however this will be accompanied by periods of volatility.
As many of you would already know the Ministry of Economy in Argentina formally decreed the establishment of temporary foreign trade measures aimed at reducing the Argentine fiscal deficit back in early September. These temporary foreign trade measures can be viewed as the Macri administration responding quickly to the devaluation and restoring confidence in the markets and the IMF.
At the time of the announcement the temporary special export duty was immediately applied to all exports of Orocobre’s 66.5% subsidiary Sales de Jujuy SA (SDJ) and Borax Argentina SA (Borax) up to 31 December 2020. The Company has calculated that such duty would result in a cost of approximately 8% of its export sales revenues. However, to date a significant proportion of these this tax has been offset by the devaluation of the peso.
Under President Macri, Argentina has ambitions to become a lithium superpower, wanting to supply as much as 45% of the global market, up from its current market share of approximately 16%.
Since his election in 2015 President Macri has set out to re-invigorate mining investment by working on two fronts – tax cuts and infrastructure investment. He has earmarked ARS $33billion of federal funds for transport investment, particularly to connect isolated lithium rich deposits in Salta and Jujuy to Chile. It’s announcements like these that offer the board confidence that Argentina remains a preferred location for lithium production in South America.
Review of performance
This has been another watershed year in Orocobre’s vision to become a leading and sustainable global supplier of high grade, high value lithium chemicals. Our annual report explains in depth the operating and financial performance of Orocobre last financial year. There will be an opportunity to ask questions on the report later, however I will take this opportunity to make