Running discussion on SP, page-31168

IMV all these arguments and petty bickering across all threads are entirely academic.

The crux of reality; Post #:46730954 which i support. Come down to opex costs (AISC) and revenue (what do i sell my product from)

They way I see hard rock cost positioning and feel free to correct me with a different view, starting with the lowest cost on AISC basis:
1. Greenbushes (by a country mile)
2. Ganfeng / MinRes Mt Marion (although they produce sc4 and sc6 (which is now 5.something) but taking the average across the lot.
3. PLS
4. AJM
5. GXY

IMO AJM and GXY seems to get slightly better pricing for product than PLS as current and thus you can probably call 3/4/5 near enough a dead heat.

For all the petty bickering that has went on for 3 years it fundamentally comes down to where you sit in that leader-board. Long term i see that leader-board growing to about 6-8 producers at full song.

If your AISC is more than PLS/AJM/GXY you're dead in the water at current pricing. No one in their right might will fund you in the hope pricing increases. That goes for AVZ too IMO. If you slot in somewhere ahead of PLS/AJM etc then you've got a decent business case.

The next factor is Capital Intensity, which is like a hurdle rate to success. Generally speaking higher capex less chance of funding. Capital funding is hard to get in any state of market let alone today.
Forget NPV and IRR most people are happy risk less capital for a lesser proportional return. What do i mean by this. Well if i said lets flip a coin for $100, most people would go ok what the hell, i'm game. Ok lets flip a coin for 100k? still as eager, i doubt it. Same goes for capital. 50M capex for an NPV of 200M probably more likely than 500M for 2Bn NPV. (just my view btw)

You only need look at rare earths as an example where most capex is over 500M USD and it's primarily the reason most projects have been in development for 10 years plus. So in that sense a staggered approach is probably the best bet. Hence why AVZ has gone down that path knowing full well the full bells and whistle approach will be difficult regarding of the NPV of DFS. If WOF flotation is proven to provide better returns for MLL and LTR then credit to them and it may turn industry norm. IMV it's a function of the ore amenability. For the record i think MLL's economics may be better than LTR's, though i'd still not entirely convinced about how the lithium is locked in the lattice and as such i think MLL is more forced to go WOF as their liberation technique requires the fine grind size. LTR on the other hand need to offset high mining costs, and a stacked variable feed grade. i.e. they want more bang for every buck they dig.  

Re: MLL vs AVZ. I find this entire debate very bemusing. Why, well if anything these 2 stocks should be teaming up as macro cases for both is very similar. Very large resources, Very good grade, both based in Africa.

If i was in MLL i would want AVZ to get  finance, because ultimately it won't be extra supply on the market that will kill that project, it will be if you can obtain financing. IMV the chances go up significantly if proven that the supply chain wants product in Africa. Conversely if i was in AVZ (which i am) i would want MLL to get up for the exact same reasons. As i eluded to previously, if both these companies have AISC's less than PLS then ultimately it's not these mines that will go to the wall with a suppressed spod price. It will be the higher cost producers. i.e. GXY/AJM/PLS/LTR etc etc

Re: High capex.
I have seen a few post about AVZ's high capex, but would advise some to not throw stones (as i've seen from both LTR and MLL threads specifically). If anyone thinks grinding products to dust and implementing a WOF is going to be inherently less capital intensive think again. Ultimately what it should be doing is increasing the margin. i.e. your sale-able product will be higher grade less impurities which gives you an edge against current supply. aka the market for SC6.5 isn't met by current producers and so you can separate yourself from the crappy pricing mechanism's most have subscribed to.

The risk with WOF is that if anything we have seen from current producers it is the most variable part of the process circuit and whilst it's very easy to replicate in the lab in a controlled environment with a uniform sample, this isn't exactly as easy when you've got variable feed stock. If i was LTR and MLL i would not be throwing stones as large as have been until those revised capex figures roll in for the new PFS/DFS. I'd also then read the fine print of these. i.e. if LTR can get something as academic as exchange rate wrong. i.e. of .8 USD/AUD which has only been the exchange rate for a total of 1 week in the last 5 years then i question the integrity of the entire study.

In my personally view in terms of these 3 companies, AVZ, MLL, LTR. I feel that MLL probably provides the most potential upside. But i also feel it's the least likely to succeed. (that's not to say that it's economics won't be better than current producers). If it does get some success that's fantastic, the returns will be huge. RvR. I'll need to see this next DFS to revise my judgement, but previous experience was that the capex they applied was well, wrong. IMO. I've got colleagues and contacts which complete these studies and from all accounts also struggled to get the same outputs. Yes, this sounds a little i know more than the company but if the DFS was rock solid and those figures entirely accurate and good and obvious then the company would be worth more and wouldn't be revising its strategy or DFS/BFS etc etc

LTR will probably get funding (because apparently everything is economic in australia) and then will probably find itself with PLS/AJM (marginal at best IMO). Hence why it's not targeting any production until 2025 IMO whilst waiting for pricing increase. If you run the NPV for most companies now it's doesn't meet the hurdle rate, hence why everyone is re-running DFS/s and angle. Anyways, LTR at it's currently valuation it's near half the NPV of the project. (on the current study) So basically no upside.(on KV) People claiming on those threads that KV is worth 1.4bn need to get their heads read. The NPV in the PFS literally states what it's worth. typically you get valued as fraction of this until you produce, how they think the company should be worth 2-3 times it's NPV is just complete nonsense. When i'm talking LTR i'm talking specifically about it's lithium, which is imo absolutely capped in terms of current value, they have exploration upside in it's new assets for which full disclosure i have holding in a nearology play. (nearology to the julimar deposit not LTR)

AVZ is kind of the middle man. Valued at a much lesser amount in terms of it's NPV compared to LTR. A larger and better resource that MLL, but then valued at a much higher value than MLL.
Looks like a staged approach to capex means it's not a huge hurdle rate. (they can do this because grade and product is supported by Dense media separation only). aka don't need a flotation circuit to produce SC6. Yes there's so other stuff going on, securing extra % in project, sulfate bla bla bla but all this stuff is ultimately try and make things as attractive as possible to get offtake/funding. Until this happens for any company it's really sideways/dormant.

In summary;
-All the projects have different risk vs reward profiles.
-We don't know exact capex and AISC cost until LTR and MLL release new DFS's
-MLL and AVZ are probably more alike than they are dissimilar and holders probably should be more aligned in upsetting the apple cart of the high cost australia hard rock supply. (You win, I win mantra)
-Geopolitical risk is a function of the NPV's discount rate and thus is incorporated in the study itself IMO.
-If spod pricing remains at 400USD/t for SC6 everyone bar greenbushes is dead in the water unless vertically integrated.
-Forecasted demand of spod probably means than at least another 4-5 operations will need to come online to fill that market by 2030. i.e. All of these mines will probably be developed in time, so people have wasted 2-3 years of your life incessantly bagging out other stocks. Btw has this every made another stock succeed? Probably not.

*disclosure
Free carried AVZ holder from early 2017.
Have held PLS/AJM/GXY in the past but not as current.
Bullish lithium long term but have shifted commodity portfolio to larger proportions in other materials.
Would personally invest in MLL or LTR if i can replicate their DFS's and see appropriate risk vs reward.

These cheap shots from both stocks really need to flatten out IMO. Not doing either threads any favours, just making all developer stocks look like the holder base are irrational, childish, non-nonsensical blabber.

all IMO.

SF2TH