Running discussion on SP, page-6633

I think I'll simply repost what I have previously said to you. Refer: Post #: 33619459
And below I will add some details where I see the issues playing out.

Lithium producers only (small scale)
Now if you look at pure lithium plays like Mt Marion (MIN) and Mt Cattlyn (GXY), the fact the deposit is generally lower grade around 1.1% and the production rate is not significant (Mt Cattlyn - 1.6 mtpa ore feed, whilst Mt Marion is around 2mtpa from recollection and some is not sold as 6% grade spodumene by the way), their opex costs as last reported I think were some US$350 per tonne. Now two points here, the importance of grade is that it takes 7 tonnes of ore grading 1.1% Li20 to produce 1 tonne of 6% spodumene concentrate at a 80% recover factor here. Now, yes they may end up producing other minerals in a process flow sheet that could act as a credit against costs but have not done so to date (see PLS below for importance of this).

Refer GXY announcement for example Post #: 30328766

Impact of say tin/tantalite/tantulum
Which now takes me to PLS. If you look at PLS and their DFS for a 2mtpa operation and 5 mtpa operation they were forecasting opex costs of around US$200 per tonne. Why, firstly the resource higher grade (1.26%) meaning you need 6 tonnes of ore to produce 1 tonne of spodumne concentrate grading 6% (which leads to 14% more revenue (6/7) from the per tonne ore feed when compard to MIN and GXY). Secondly it is the impact of tantalite credits. If you want to understand what I have said understand the Table on page 3 of this announcement and footnote 2 in particular to that Table. Post #: 19271690

Large lithium producers only
Now the producers of spodumene at Greenbushes,i.e. Talison, do not recover tin/tantulum, but attain economies of scale through a large resource and spodumene production level, and the fact it grades around 2% plus Li20 (meaning need roughly 3.5 to 4 tonnes ore to produce 1 tonne spodumene). Costs of production are stated at around US$200 per tonne (note no tin/tantulum credits), albeit outdated study, but Greenbushes has publicly stated from what I have read to be the lowest hard rock cost producer in the world. I guess economies of scale at work ifyou have size and a high grade deposit. . Note this mine is close to the port of Bunbury so transport cost to port limited. (note: PLS, MIN and GXY a few hundred kms fromport and I think they truck as well their).
http://www.marketwired.com/press-re...-fiscal-year-2011-results-tsx-tlh-1559440.htm

Bringing the data to AVZ
Your probably scratching your head here why all the above. Simple:
1. The AVZ deposit is also high grade, albeit less than Greenbushes. At 1.5% Li20, compared to PLS it will need 1 less tonne of ore (meaning 5 tonnes of ore for AVZ toproduce 1 tonne spodumene concentrate) to produce 1 tonne of spodumene concentrate. A potential cost saving of 17% compared to PLS onquality. Or another way to put it, 17% more revenue from installing the same say 5 mtpa ore feed.
2. Scale and size: well economies of scale give you the biggest bang for buck. A 5 mptpa to 10 mtpa operation, well means economies of scale, which means lower production cost.
3. Tin/tantulum in a process flow sheet - if profitable refer to PLS because there the tantalite is helping its low costs base (not distance to port). And I ask you, what is tin/tantulum worth so you can see, provided it is profitable to do so, the importance to reducing costs overall by point 3.
4. Now we know transport costs will be large in DRC but points 1 - 3 above are the key in addressing that issue. Without 3, then viability can be problematic. - see Post #: 30646252 If don't have 3, cost reduction options then include producing lithium carbonate (to reduce tonnages exported), but that means finding a power source etc, or look at the mix of transport options as rail is far more efficient than road.
5. So my guess is scale, size, tin and tantulum, economies of scale and a better Li20 grade than others, except, Grenbushes, IMO means a operating cost around the US$300 per tonne mark. Yes a guess but a better guess than the nonsence been posted here by so many which don't look at the total interaction of all the variables in a DFS (so many focus on transport but forget about tin, grade, scale in a project economics sense etc etc). NPVs have been posted by posters here, including me, but the discussion then goes back to transport like nothing else in those NPVs matter.

And what we are lacking is a plan to mining here as I keep saying. It will be a combination of the variables above which determine viability or otherwise but IMO I really don't think AVZ has really given much thought to a DFS because they have constantly been IMO in the please TO us mentality and that is a problem.

JORC here, given the homogenous nature of the deposit is a formality IMO. Why no TO - pretty simple to me, there are other options of supply available to 2025 through ramp up if others don't come onstream, so AVZ need to be active and ride its own luck to get its project to market (i.e. their view that we are large and they will come is the problem IMO, especially if other spodumene producers, as they are proposing in WA decide to expand production (i.e. PLS hasn't started production but is now proposing 5mtps, up from 2mtpa ore feed).

That is IMO the market is probably saying they do not expect to see AVZ in production before 2025, despite AVZ saying aeons ago it was targeting 2021, but there has been so many delays since that time unless AVZ get cracking 2021 could become very doubtful indeed. At he snail's pace they have been moving (look at the delays in drilling) at that pace there would be no way on earth IMO they would meet a 2021 mine start date without been proactive (noting they haven't finalised JORC and to frank I get no inclination at all when they plan to start a DFS). And that then is reflected in SP - delays is a key here.

EV demand will be huge, so the market is asking the question well AVZ do you want to be part of the action by 2021- 2023? - and to be frank the answers from AVZ have not been convincing (that Nigel video back in April I was not impressed with as I posted here at the time) because IMO AVZ doesn't know what it wants (and the selling by Klaus I think reflects the markets view that AVZ wants to be TO but the TO IMO won't come in the next 12 months at least). That is the main problem here IMO when you want to assess SP. there are other factors but lack of a plan a key factor because that plan would also look at the options for devlopment and associated viability. And I'll repost again my issues with the lack of a plan by AVZ and how IMO that is been a factor in SP decline along with Klaus selling Refer Post #: 33618004

I simply see AVZ as a long term hold now (which means the SP will probably trade in a tight range until management get their act together). A plan to mining is required here, in fact it is fundamental to SP growth. Along with that plan comes targeting Offtake Agreements and the question is does the AVZ BOD have the stomach to progress this too mining (if not new blood on the BOD certainly required) etc etc And what is the development plan here, I guess we are a long way from that given the DFS hasn't even started as we are yet to finalise drilling.

A VB related rant and answer to your post. Anyway, I think I'll take a breek from the AVZ thread until drilling results come but having written this, with embedded posts, might just keep referring to this post when we go back to one dimensional transport cost issues without looking at the whole pie.

All IMO IMO IMO IMO IMO