Thanks for the update UY. It has indeed taken some time to get this Version 3 application assessment completed. Let’s hope that approval is not too far away.
There was an interesting comment made at the AMAL investor presentation this week in Singapore where it was stated that there are a number of lithium carbonate processing plants under construction in the world that do not have any feed.
I find that fact quite astounding that someone would build a plant without having secured contracts for supply. It does however explain earlier comments made by MC about a number of companies knocking on his door wanting spodumene supply now. If demand is as strong as he has previously indicated then we should be in a position of strength in negotiating terms for future supply including pre-funding construction of a 2nd DMS plant.
It is one thing to have the demand but I see our main issue in entering into long term contracts for a 2nd offtake agreement being our current ability to supply additional product. At present, our reserves are sufficient to supply only Burwill with 300K of Spodumene for a 5 year period once the fines circuit is installed. I don’t think Burwill would exercise their rights for any supply beyond that given the size of their processing plant hence an opportunity for a 2nd offtake agreement. Infill drilling recently undertaken was targeting a further 8.8 million tonnes of resource to be upgraded to the reserves category . This again would only equate to further supply of approximately 3-4 years if the intent is to have a 600,000 t/a operating capacity in 2020 as suggested in the CSA report that AMAL released.
It has been reported that multiple drilling rigs are ready to commence operations in October. For us to consider production increases to 600,000 t/a as well as attract institutional investment our LOM needs to be at least 10 years which means we need to have reserves in the order of 45Mt. Is it out there? I think it is. Prior exploration work at the Creekside deposit had suggested that the resource was approximately half the size of the Bald Hill project. Combine that with the extensional drilling to east and north of the Bald Hill mine and we could reach that target very quickly in my opinion.
One thing I am fairly certain about is the fact that a floor seems to have been formed on the share price and that shorters have not been successful in driving down the AMAL or TAW price further than the 28-29 cent range. We are due a string of positive announcements in the coming weeks including tantalum offtake agreement, infill drilling. , Version 3 approval, $15M debt funding approval and commencement of exploration drilling.
There’s a lot to like about this story once the merger is out the way.
TAW Price at posting:
29.5¢ Sentiment: None Disclosure: Held
