Banter and General Comments, page-7722

Not sure what negativity people are trying to extract from the Altura deal.
Things would have been very much worse for the sector if AJM had no offtake at all.
That would have put the bears on even higher horses.
As it stands, AJM have been in some trouble with high debt and repayment level and a dodgy partner to boot, so even though they were probably quite desperate to do a deal, the only real significance to the pricing they got is that its an exact replica of the 2018 deal that Ganfeng did with them.
Same exact range of $550-$950.

https://thewest.com.au/business/mining/altura-up-on-new-spodumene-supply-deal-ng-b881016694z
"Gangfeng will pay a minimum $US550/t for Altura’s spodumene concentrate and a maximum $US950/t until the end of 2020."
(published November 2018)

So much for the decimation of spodumene pricing. The deal offered looks to be exactly the same as the deals from 8 months ago.

My own estimate is that a well run Chinese converter processing a good product quality and doing it efficiently is making $2k USD a ton profit (roughly) on any $12k/ton carbonate or hydroxide price, even while paying as much as $1000/ton to the miner.
(spodumene $8k + processing $2k + converter proft = $2k)

When the prices were higher then the converters were making an absolute killing

even if their plants weren’t terribly well tuned or had crap recovery.

The last period has seen upgrades and better matching of converter to supplier ore profile to bring down the processing costs and produce better product.
Ideally both the converter and plants tune their concentrator and converters to each other, as Galaxy has done with mica classifier installation and then YOP program. Galaxy's client, Yahua has now completed their own upgrade.
My guess is that today's booked 22kt is off to them as they restart their production.
Would be great to see another shipment scheduled for this month too.

The aim for everyone is obviously to maximise the value of every last gram passing through.
Even a $2k/t profit is a handy $50m USD a year for a 25kt converter.
Yahua now has something like 46kt production. That will be a quick ROI for them.
Then what - increase again?

ON $12k/t spodumene - if they pay less than $1k/t then they get better margin that that.

Even on $10k/t they can make the same margin while paying approx $800USD/ton.
This is all still very decent profit for the lowest miners like Galaxy, so that we can all expand to meet the gigafactory demand.

These are all very rough figures. Please DYOR.
Converter costs can be as much as 50-75% higher for some older plants or commissioning periods/low recovery/mismatch with the ore body.
Transport costs also etc etc. Some converters are hundreds of ks inland (though ore is likely delivered on train).
But you can see why and how there are very few winners and a lot of very bad losers if spodumene ever gets down to $7-8k while supporting a viable hard rock industry. Only a few miners would be left standing, including Galaxy and that destruction of supply would itself boost price.

The Altura deal isn’t a big contract at 35kt so nothing to get too excited about

but it does seem to suggest that, along with Galaxy’s increased shipment size and the emergence of another offtake for PLS

that things are getting back on track.

That should not come as a surprise. Take another look at the gigafactory thread.