IMO, expansions require ironing out the issues from the initial Stage 1. On this basis, I feel AJM has been significantly improving around its costs, working towards nameplate capacity and furthermore improving recovery rates so that it works its way to producing 220,000 tpa of spodumene concentrate as envisaged in Stage 1 from a 1.54 mtpa orefeed facility in the initial Sept 2016 DFS (albeit a 70% target may become a more realistic target to pursue IMO now).
Stage 2, based on the 2017 DFS) is about duplicating the Stage 1 facility so that 440,000 tpa of spodumene is produced from a 3.08 mtpa ore feed facility.
Going to the reserves, the resource upgrade in October 2019 is interesting in itself - Post #:
40787702 They clearly are confident that there process is starting to work that they have reduced cut-off grade to 0.3% Li20. Secondly, they are confident they will find more resource with further drilling by the looks of it as well - presumably as spodumene prices turn and AJM returns to profit, i.e. that is the risk here been when are prices to turn, then they will use those retained earnings IMO IMO for future exploration is my point to beef up reserves. (With its various issues, one thing in regard to PLS is they have three times the current measured and indicated resource of AJM - not an issue with current plant configuration for AJM but resource critical for expansion scenarios). Thirdly about 90% of the measured and indicated resource in that Ann made it to the proven and probable category, which in itself is an exceptional result (as you normally might see 60% - 70% of that resource end up there)
The Ann linked above has a proven and probable reserve of about 37.6 mt, averaging 1.08 Li20. The DFS study in 2016 assumed a 80% recovery rate, so I'll use that initially but then change that to a 70% assumption.
At a 80% recovery assumption you produce 220,000 tpa, using a 1.08% Li20 input feed, as per the DFS, or basically 6.93 tonnes of ore grading 1.08%per tonne of 6% spodumene concentrate - Post #:
40787702 At 70% you need 7.9 tonnes of ore to produce 1 tonne spodumene concentrate, but you can only produce 195,000 tpa of 6% grade spodumene from 1.54 mt nameplate capacity (which would constitute a 87% of the production envisaged in the DFS itself at nameplate btw). Assuming 95% of the proven resource is recoverable and 80% of the probable resource is recovery minelife on that reserve is 20 years. If it is fully recoverable it is 24 years btw.
Workings are here:
Obviously any thought of Stage 2 expansions requires an increasing resource, which even the Stage 2 expansion document alluded to - Post #:
32695024 From this Stage 2 DFS a key comment is here, which implies they are yet to consider any deal with PS in increasing reserves at that time, and I am not sure where they are at yet either in any discussions, but further below I suspect AJM is seeking to increase resources from its own tenements and any deals it may have with SYA btw:
Now returning back to the 9 October 2019 announcement, well I suspect they are becoming more confident they can increase resources from their own drilling programs on own land or elsewhere (but not PLS land btw). A relevant extract:
Now turning to the more recent Ann - Post #:
45024297 - this map gives potential for resource expansions if the drill bit works out, but obviously AJM need to get Stage 1 sorted before moving to Stage 2 IMO, which requires in any event an increase in resource, so that Stage 1 and 2 can feed enough resource for a 3.08 mt orefeed operation (Stage 1 = 1.54 mt). To do that, and using assumptions of 95% recovery of proven resources and 80% recovery of probable resources means you need some 75 million tonnes of proven and probable reserves to feed an ore feed configuration for 20 years - about double the October 2019 MRE. About 60 mt in the proven and probable category if 100% recoverable for a 3.08 mt ore feed facility.
Obviously what I am saying is without significant resource upgrades whilst AJM will benefit from rising spodumene prices and expansions, it needs significantly more resource to takeup more of the benefits of world demand LCE equivalent climbing to 2000 GWh by 2030. At the end of the day, as per my posts in other forums, IMO Australian producers cannot supply the gap in their entirity hence ample room, should the road to 2000 GWh transpire to 2030, for new greenfields projects, but having said that as an existing producer, if AJM can get over its current hurdles, when spodumene prices rise well it will have the funds available IMO to do more exploration and therefore hopefully find more resource to take up opportunities, where applicable.
Having funds also allows it to look at other options in where it can source feedstock as well, but in the now AJM, like it is doing, just needs to concentrate on continuing in getting costs down and working on the road to profitability, which obviously means a need for spodumene prices to rise. Rising spodumene prices will aid AJM in reducing its interest rate exposure, and I do think spodumene prices will turn and hence why I have invested a small amount into AJM, because as I have posted previously if AJM doesn't survive I doubt PLS will survive - section 3 of this post provides the basis of why I have invested here - Post #:
43616066, and in terms of nearology my theory is also that AJM may have got the better part of the resource to work (given it hasn't had teh same issues as PLS in its production process, but that is only a hunch based on limited information- Post #:
43616066).
Anyway, I am sure as my first substantive post in the AJM thread it is riddled with errors, as still coming to terms with a number of the Anns etc etc. If AJM can survive the next year or so, I do see a bright future hence the risk reward equation here, and obviously rising spodumene prices and curtailing costs a key. And the first to benefit from a turnaround are existing producers hence why I have dipped my toe in here.
All IMO
