The company said production from Olaroz in Argentina had slumped 29% in the March quarter to 2802 tonnes due to a 24% drop in evaporation rates as a result of reduced solar radiation from cloudy conditions and above-average rainfall.
The February mean evaporation rate was the lowest recorded since 2011 and less than half of February 2017, resulting in lower than expected brine concentrations at the beginning of March.
Orocobre said concentrations improved during March but did not recover to the level expected, affecting production performance.
The company is expecting a turnaround in the June quarter with harvest pond inventories around 30% above the same time last year.
Plant feed brine concentrations are currently 20% above the same time last year.
Despite the expected rebound, Orocobre expects full-year guidance to come in around 10% below its previous expectation of 14,000 tonnes.
Orocobre managing director and CEO Richard Seville recognised the lower guidance was disappointing, but said the weather was beyond the company's control.
"Of the operational metrics that are in our control, I am pleased to report that we have seen improvements with greater stability of operations and despite the weather being worse when comparing solar radiation, rainfall and evaporation rate, we are in a significantly stronger position than this time last year," he said.
"The operational team have made significant progress. However, recent weather events have confirmed the previously identified need to further improve the robustness of operations and reduce production variability from weather impacts.
"Plans for the Phase 2 expansion already include enhancements to the lithium carbonate processing plant and the potential use of evaporator/crystallisers during adverse weather events to maintain consistent brine concentrations prior to processing in both Phase 1 and Phase 2."
On a brighter note, the company sold 3052t at a record realised price of US$13,533 per tonne, up 17% quarter-on-quarter, for sales revenue of $41.3 million.
Orocobre had previously flagged a 25% increase in pricing from the December 2017 half to the June 2018 half.
The company said unit costs were expected to come in higher than the December quarter's costs of $3946/t due to the lower production, but the higher price was expected to result in a better margin than December's $7604/t.
"The weather related production setback in the latest quarter is an extremely unwelcome outcome after the much better production performance in the previous quarter and it dents the credibility of the operation at a time when some commentators are predicting a looming weakening in lithium prices," Bell Potter Securities analyst Peter Arden said.
"We continue to believe the Olaroz operation is capable of sustained improved performance and that it can generate strong and growing cashflows for Orocobre that justify a higher rating for the company."
Bell Potter currently has a buy rating on Orocobre with a A$9.10 price target.
Shares in Orocobre plunged by 9.5% yesterday to $4.74, its lowest level since October last year.
