E Third World Populism

New fields were brought on ahead of schedule this month, Thunder Horse NW in the Gulf of Mexico and Western Flank B in Australia. Our UK oil major also is growing its network of gas stations in Mexico and acquiring BHP's US-Canada network for $10.5 bn.

Moreover, contrary to its earlier plan, BP will fund the BHP buy entirely from cash and will not use stock for the deferred amount it will owe. This is very good for shareholders, including us. It will use proceeds from the associated $5 to 6 bn to reduce debt. BP raised its dividend by 2.5% to $10.25 helping me survive the cut by GE. BP gained over 2.8% so far today.

*Nintendo reported a whopping 12% gain in its FY 2018-9 Q2 profits (June-Sept) over last, to ¥34 bn ($300 mn) thanks to the Switch. We sold half our holdings in Tencent to buy NTDOY because our India reporter is keen on the software which sold well to other young gamers, despite hesitation from our Japan reporter. (It did take a year before Abhimanyu persuaded your editor. ) Profits in H1, not broken out by quarter, rose to ¥64.6 bn ($572 mn) on sales of ¥389 bn, up only 4% from prior year. Gaming did it.

The Switch device and its games sold well, with 5 mn units being bought, a 25% rise from the prior year. The games also work on smart devices which bring in older players in the US and other markets, not just Japan. Our India reporter now lives in a college town and is well plugged into what appeals to the country's middle class young.

Miners and Industrials

*Orocobre of Australia produced 7% more lithium y/y in its Q2 but 39% less sequentially because of a 2-week shutdown for its $40 mn upgrade program (planned) and very low evaporation rates in Argentina's winter this year (not planned). Its production fell to 2,293 metric tonnes in the Sept. quarter. Despite this, sales were $32 mn, up 32% over last year thanks to higher prices ($14,699 per metric tonne FOB). Cash costs per tonne were only US$4,640 so gross cash margins hit $10.059/tonne, up 62% y/y. It added two new harvest ponds to extract lithium from liquids.

OROCF which is primarily listed in Australia, and controlled by Toyota of Japan via a sub, and with the Province of Jujuy also owning shares, is upping production to 42,500 tonnes per year and has spent $10 mn of the $40 mn approved and the $285 mn total cost.

It is in the process of getting approval for an environmental protection contract for the stage 2 expansion of the Nahara lithium hydroxide plant in Japan for Veolia, the French waterworks firm we used to own. This will be done before other new projects start there.

OROCF has cash on hand of $308.7 mn thanks to the capital increase of its partner Advantage Lithium of Canada for the Cachari joint venture,of which it owns a quarter. It is moving toward a phase 3 definitive feasibility study to be completed early next year. It also plans to recycle carbon dioxide used at its Olaroz facility to make battery-grade lithium carbonate, replacing as much as half the chemical now transported 1800 km (1200 miles) from near Buenos Aires by truck. This can cost less than $2 mn.

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