Lithium Media Articles, page-521

Great article, thanks for "Digging it Up" and sharing here Huxter

My favourite bits are below, especially the last sentence which Elpha might be interested in also,

As,

Lithium’s ascent from $5,000/t in 2015 to $25,000 in 2017 – albeit for tiny volumes but tracked as “China spot” – and the ensuing financing and M&A speculation it engendered, proved unsustainable.

As will today’s low-quality China spot south of $6,000 – below most producers marginal cost.

Those who “make the grade” i.e., Tier One lithium producers selling to Tier One cathode and battery makers selling to Tier One Western Auto OEMs who are guaranteeing their customers 8 to 10-year battery warranties, are getting today, and should continue in future to get $12-15,000/t long term for the privilege.

Identifying those that can produce Tier One quality for Tier One customers for $5-6,000/t AISC is where the lithium (rubber) meets the battery (road) – and should stimulate hand-to-wallet reflex at today’s deeply discounted equity prices.




The bears miss this nuance, and their 2018 short stories were “right for the wrong reasons” – Trump’s 2018/19 trade war, China’s significantly reduced 2H/19 subsidies and now COVID-19 resulted in a sharp demand hiccup.

This “under-demand” caused the price collapse, not a surfeit of low cost, qualified supply for western OEM EV batteries that the institutional sell-side predicted.

Of the 2Mt forecasted 2030 demand, the vast majority will be for higher priced “battery quality” chemicals – on balance, “specialty hydroxide” for range-conscious Europe, USA and Japan/Korea.

“Commodity carbonate” will be primarily for China and India and other emerging markets whose consumers, often buying any vehicle for the first time, have little concept of “range anxiety”.

Some 65% of lithium chemicals today are processed in China, including 80% of highest value battery quality lithium hydroxide. Much of this processing comes from hard rock spodumene supplies.

A sweet spot size for a battery quality lithium chemical plant is 10,000-25,000t capacity.

Assuming 20,000t, more than 75 new plants will need to be built globally, alongside accompanying precursor lithium material that must be mined from conventional hard rock sources and new innovations in clay/sedimentary deposits.

At an average capital intensity for mine and chemical plant of $25,000/t, 75 plants at 20,000t capacity will require nearly $40Bn in capital investment over the next 4-5 years to meet 2030 lithium demand forecasts.

This is an enormous amount considering the collective equity market cap on the Mr. Market Scoreboard is less than $25Bn. But it is a trifling sum when juxtaposed to Big Oil companies like Exxon or Chevron with capex budgets for $25Bn PER YEAR, or Big Auto who each spend $4-5Bn each year on advertising alone.

Those industries are suffering at present.

Will Big Mining step up to a good Li Fe?

Or will it be Terafactory-talking Tesla “getting into mining” to cause lithium FOMO?










Cheers


Frank