Orocobre Limited (ASX: ORE) shares have slipped 1.99% after its annual general meeting (AGM) this morning. Management detailed the struggles the company has faced in 2020 due to costs arising from COVID-19, as well as the persistently low lithium market price. At the time of writing, the Orecobre share price is trading at $2.96.
Highlights from the AGM
Orecobre says that its financial performance reflected the difficult lithium market conditions with persistent oversupply and weak prices. In the second half of FY20, coronavirus impacts made the situation worse by reducing global production in battery and electric vehicles. In response to these external factors, the company reduced production rates, and brought forward planned maintenance activities.
The lithium supplier said productivity advances at its Olaroz mine in Argentina had been overshadowed by the pandemic. It noted that Argentina was one the hardest-hit countries with 2.5% of its population having been infected with COVID-19. New safety measures and protocols meant that new and rising expenses were incurred this year.
On the bright side, Orecobre achieved growth with the acquisition of Advantage Lithium during the year. This effectively doubled the company’s resource base. The company also remained confident that continued growth in the electric car market and other forms of transport would underpin the company’s long-term growth.
How has Orecobre performed in 2020?
Earlier this year, the company posted a 50% decline in revenue to US$77.1 million, and a US$67.1 million loss after tax for FY2020. This loss includes impairments due to COVID-19 costs. Following the loss, the company raised a $126 million equity placement to fully fund its Olaroz mining project, so that it could navigate through the short-term challenges of COVID-19 and the pricing environments.
The company’s business has been severely hampered in recent years due to the oversupply of lithium in the market. Management has said this supply could be absorbed if the production of electric vehicles increased significantly over the next few years.
Despite the company’s weak performance in 2020, the Orecobre share price has risen by 5% on a year-to-date basis. At the current share price of $2.96, it commands a market cap of $1 billion.
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