Ann: Mt Cattlin Mining Approval Granted , page-26

The main advantage of carbonate production from spodumene is that production levels can more quickly be adapted to suit demand levels, so it can be scaled up quickly when demand exceeds supply. In addition there are the markets for non-chemical lithium and tantalum that are the low-growth bread and butter for operations like Greenbushes.

When it comes to these niches Talison (Greenbushes) is the main competitor for GXY, not the brine producers. Talison have long established operations, customers, suppliers, up to three times the lithium grades of Mount Cattlin and an overall resource more than 20 times the size.

What GXY are doing that Talison haven't is build the conversion plant themselves. Its yet to be seen whether this is a major advantage. They will be competing against other Chinese outfits in this part of their operations though its not hard to believe they can do it more economically with a larger and more modern plant - so long as its fully utilized. Ultimately their best strategy may be to run their plant using high-grade feedstock from Greenbushes and forget about Mount Cattlin.

I'm bullish on lithium demand and think that scenarios forecasting a 10% penetration for various forms of hybrids/EVs are way too low. In time I think it will be more like 90% given the innovation and investment momentum building in the industry. Even so, all the major producers (including Talison) are bringing on new capacity so current industry cost structures are likely to remain the benchmark. It seems sensible to me to go for the lowest cost operation - not only will they be more profitable under a scenario where demand continually outpaces supply, they are less likely to go under if it doesn't. Its not a deep market like gold or copper and GXY are likely to be one of the most marginal producers, probably only ahead of some of the very small scale Chinese operations on cost. Its a shame that GXY haven't provided the opex figures from the DFS so we can get a clearer idea of where they are likely to sit. ORE is likely to be at least close to the major South American brine producers, and ahead of the spodumenes, Chinese and US brines, and Bolivia (if it eventuates). Its a reasonably safe bet in anything but the most brutal price war.

A couple of presentations from Talison that I have previously posted - worthwhile reading for GXY holders.

http://www.talison.com.au/pdfs/LM&S_Santiago_2009_2003_Version.pdf
http://www.talison.com.au/pdfs/2009_Lithium_Supply_-_Santiago_Final.pdf