AVZ Peer Transparency, page-62

Evening all,

Benchmark Minerals have provided a make or break H2 2019 outlook for the majority of spodumene producers (IMO).

'Looking ahead, Miller said he expects lithium prices to continue to soften for the rest of the year.
“Particularly for hydroxide where production capacity expansions and a slower-than-expected transition to high-nickel cathodes is likely to take its toll,” he said.

In terms of spodumene, prices are likely to trend below the US$550 per tonne level in the coming months, and prices could trend closer to US$500 by the fourth quarter.

For Miller, one of the factors to keep in mind in the next few months is how the premium for battery spec material develops — because even though there are new supplies entering the market, not all of this material has been qualified.

“How quickly this new material is integrated into the supply chain could have an impact on the supply/demand balance as we approach what is typically peak EV production season in China,” he added.'

https://investingnews.com/daily/res...-premium-narrows-lithium-hydroxide-carbonate/

Conclusion: AVZ's spodumene producing peers (with the obvious exception of Greenbushes) may well drop like flies this half (or forced to either re-finance with unfavourable terms and /or mothball their projects) given the above BM price forecast for spodumene concentrate. This prediction is in addition to known delayed expansion plans from various Lithium miners around the globe eg. Albemarle Corp (NYSE: ALB), the world’s No. 1 lithium miner, postponing plans to add about 125,000 tonnes of processing capacity due to oversupply as well as delaying the building of 75,000 tonnes of processing capacity at Kemerton.

As you can see from the below graph, all but one of the SC producers shown are operating near, at or above the BM's forecasted SC price range for H2 2019.



A US$500-$550 SC price for H2 2019 is unsustainable for the majority of SC producers IMO, especially given that their already high production cash costs do not include G&A, exploration and other non-production expenses. Somehow they need to rapidly bring their production costs down and / or reduce 'penalty elements' contained in their concentrate in order to attract a price premium - a near impossible task for some of them IMHO.

In addition to the world's disruption of (and inevitable transition to) clean energy and emission free transportation, the current price and quality conundrum for many SC producers is actually great news for AVZ. i.e. IMO the short term outlook for SC will likely result in a significant reduction in terms of  forecasted supply (not to mention discouraging further exploration), eventually creating demand / price spikes and increasing the likelihood of the world requiring Manono to supply quality SC6 on an adequate scale sooner (CY 2021/2022) rather than later (CY 2024-2025).   

[Sidenote: there has been a 28% price spike in Cobalt since the announcement re: closure of Glencore's Mutanda mine in the DRC. Once Lithium project closures and delays begin to impact near term supply (or concerns thereof), then the same price spikes for Lithium can be expected IMO - particularly for the more sought after Tier 1 battery quality variety]  

Further met test results due any day should continue to verify the high grade, quality nature (homogenous with low deleterious elements) of the Roche Dure pegmatite, and I believe that AVZ is developing its project at the right time as the market learns, evolves and gears up for a major tech disruption.

Therefore AVZ remains in the box seat IMO (with Greenbushes) as a quality long term / sustainable SC operation to commence production in CY2021/2022, while many SC6 producers are about to pay a hefty price for jumping the gun and not being entirely forthcoming with some of the core issues around quality and pricing.

Thus it wouldn't surprise me if we see both Manono and Greenbushes supply the majority of the world's Tier 1 battery quality SC / hydroxide over the next 10-12 years - and in Manono's case well beyond.



GLTA and don't forget the tin credits, ultra-low strip ratio and possible high-grade feed from CDL - all of which should help to further strengthen Roche Dure's already robust project economics.

Cheers
Elpha

p.s. almost forgot to mention that earlier this week 'Lithium Americas (TSX: LAC) announced the closing of a US$160 million cash injection from Ganfeng Lithium, taking Ganfeng's ownership in the Caucharí-Olaroz JV project from 37.5% to 50%. This was done at the project level; no new shares of Lithium Americas were issued. US$160 million for an additional 12.5% values the project at US$1.28 billion, 50% attributable to LAC. Great news for Lithium Americas and for other advanced-stage lithium brine projects in Argentina...'
https://www.streetwisereports.com/a...ould-reach-commercial-production-in-2021.html

Note that LAC have a 4.12mt Measured and Indicated LCE resource with an IRR of ~24% vs AVZ's 11.04mt Measured and Indicated LCE resource with an IRR of ~64% … but it just goes to show that for the right project BIG money is ready and waiting to invest in a growing sector (and yes even in a questionable jurisdiction), and thus a similar deal being offered to AVZ in the coming months is IMO imminent.

In fact my Balinese taxi driver knows of one company who have said that they will fund 100% of the Manono project if AVZ can land the product in China (CIF) at a cost of US$400 p/t or less (with AVZ pocketing the margin at whatever the going rate is for Tier 1 quality SC). However it also makes sense to diversify to your supplier base (as we've seen with WA producers having difficulties) and was also told that AVZ is in advanced talks with other interested parties i.e. outside of China.