Banter and General Comments, page-12205

You know exactly why he keeps bringing up FMG.

Because the very reason that yourself and others claim that GXY is going to the wall is a very similar reason to what many were saying about FMG back when they were struggling.

The claim is essentially that product sales prices are dropping, and this therefore points to the company not being able to make any money.

Same with FMG back then. IO prices dropping. FMG looked to be in big trouble. IIRC, cash on hand of about AUD 2.5b, and AUD 12b in debt. They had to massively slash their costs to reduce their break-even price, in order to survive. Luckily, they adjusted load terms (delay repayments) and managed to slash costs, MASSIVELY.

The point here is:
Using the "reasoning" of lower spod prices, approaching total production costs for GXY, does not necessarily mean the end is near, at all. Fortescue was in dire straits, they had to halve (or more?) their break-even price and had MASSIVE debt hanging over them. Applying the same logic, they were doomed too. But they weren't.

Also, absolutely critical to consider in all this is that we are at the infant stages of what will most likely be a massive decade for Li, with demand expected to increase 10-fold + through to about 2030. What did IO production do over a decade? Double - triple?
Sure, we probably can't halve our COP from here, but we won't have to as there are not a bunch of others producing far more cheaply and the Li product prices are only going to have UPWARD pressure as this demand builds. History shows this. May they drop a bit more over the next 3-6-9 months..? Sure, they might. But THAT in itself won't kill us. We have too much cash, and we have a means of producing product with positive margin even if the prices drop a bit further. We are "safe" for years.

Zeeshan's point is simply that if you guys were back in 2015, you'd be using the same argument to claim that FMG is going bust and everyone that is still in or buying it at $4, $3, $2 is stupid and doomed. That would have been incorrect, and it is merely one example that illustrates that that specific argument is not, in itself, robust enough to meaningfully convince anyone that GXY is doomed. We have the ability to survive a lot longer, if required, in an even tougher pricing environment. There are a number of reasons why that pricing environment is not sustainable though - mainly the fact that tightening regulations and the EV tipping point are combining to accelerate demand over the next few years, into a decade that will shock and amaze imo.

"Low prices" and "lowering prices" does not always equate to a doomed company. Zeeshan's FMG example PROVES this, and therefore a conclusion about GXY's fate CANNOT be drawn simply based on this.
To show that "everything is XYZ", you need to examine EVERYTHING, yet to show that NOT everything is XYZ, you only need to find ONE example that is not XYZ.
This is effectively what Zeeshan has done, and it's a good one too, because FMG looked to be an absolute basket case back then with their COP and debt level.
Seriously, wind back 5 years and think about what you would be saying about FMG, with them making miserable margin per tonne, with plummeting IO prices (about to crash through their break-even price), and 12b of debt...? Seriously.


You'll need to try harder to show how prices will continue to "plummet", how they are sustainable at these levels (or lower?), and how GXY will actually fare (detail) over the next 1-2-3 years. Detail. Not smug smileys and titanic jokes. Detail. If you've got a robust case, many of us want to see it. Seriously.