Orocobre Ltd. (ORE.AU) has had its problems recently, not least getting its Olaroz lithium project in Argentina operating at capacity, but it's now getting a tailwind from political and economic changes in the South American country.
Elections in November resulted in the center-right PRO political party assuming power in Argentina following 12 years of government controlled by the centre-left FPV party.
Deutsche Bank notes the new administration has already relinquished control of U.S. dollars in-country, allowing the peso to float freely.
This has led to a 40% devaluation of the peso in the past 4 weeks.
"This helps Orocobre's U.S.-dollar reported costs as well as freeing up borrowing capacity on debt facilities that are secured against U.S. dollars," the broker says. "A 5% export duty on value-added lithium carbonate has also been removed and import restrictions have been loosened which should help procurement of consumables and equipment."
It retains a buy call, lifts its price target by 3.8% to 2.70 Australian dollars/share ($1.88/share). ORE last traded at A$2.29. ([email protected]; @dwinningWSJ)
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