Not disputing your sentiment with this post, just giving out some information to put people into perspective as there appears to be "doom and gloom" sentiment over spot prices.
Spodumene producers cost approx $700 per tonne. Economies of scale such as PLS cost gets down to approx $600 per tonne. How much is spot price, $2k? $3k per tonne? Sure, a big 70-80% fall from $8k per tonne but those prices were untenable, unrealistic and was known to crash back down. I doubt any producer right now is complaining about the supposed "low" of more than 50% gross margin.
Same with chemical producers, lithium refined to end products. Miners that mine and refine selling LCE can't complain either. Lithium from brine, cost is $3-5k per tonne. How much is spot price, $15k? $20k per tonne? Some long term contracts agreed with floor of $30k per tonne? Sure, a big fall from $80k/tonne but again, those prices were a blip in the market... caused by Chinese buying... with Govt incentives and mandates to keep Chinese EVs competitive and enter the world's automobile market... copying Japan's economic model to riches but with "Chinese characteristics".
Right now, the falling prices if you look deeper is caused by China. Lithium miners and producers there are selling below their cost right this moment, meaning they are making loses. No business would do this unless they have no choice. One could speculate the Chinese Govt subsidies, shadow banking and mandate from heaven are forcing them to do it with the end goal for Chinese EV brands take market share, while they still can before Western companies catch up to their economies of scale.
The demand remains robust despite falling prices. The "pulling back" of OEMs are not due to less demand for raw materials, quite the contrary it is increasing in every market quarter by quarter.. but to keep to profit margins. ICE still relatively more profitable at this point in time... but this won't last for long. Everyone knows it.. and we would be stupid to ignore the big waves behind the scenes ExxonMobil and Chevron are making, or Gina Rinehart et al in Australia, or Livent and Gafeng, in fact look at CATL and count how many greenfield giga factories they are building around the world so as not to lose out in this once in a lifetime opportunity... too big of a waves and too many for them to keep behind closed doors.
So for those who keep quoting falling lithium prices, I say, HA! These people have no idea and they get their secondhand information from us in the industry and twist the narratives to serve their revenue-generating click baits. Don't listen to them. Diligence and being on the ground, actually knowing factual figures from the source will do wonders to anyone's investment portfolio.
Just look at PLS, some brave dumb money shorting the stock! Based on what? Sentiment? China? My goodness they are dumb. I don't care myself because as suspected, fund managers such as superannuation funds will scoop right in and acquire their dumb shorts, whoops sorry I should say "brave" , creating value for Aussies. But my goodness they are dumb... hence the term dumb money I suppose.
ASX also is a really good platform, world standards, when it comes to IPO in mining. Better than Nasdaq... when it comes to mining. I doubt PLS and VUL would leave ASX. So I'd prefer AZL sticks with ASX too at least for now until the cycle gets us to M&A in 5-10yrs time. So yes, we are getting to ahead of ourselves here.
The more likelihood scenario in the short term are the likes of Exxon, Chevron et all acquiring stakes (much like Gina is doing) so as not to hinder innovation and keep progress on developers, sufficiently funded so as not to shut down. Provide networks and introduction to meetings and Christmas parties to "naturally" form partnerships and offtakes MoU.
China may have the lion's share right now, but the lithium market is just at the cusp of the curve to exponential growth. There's not even a pricing mechanism yet such as those formed for oil, gas, iron ore, copper, etc. The same players who formed those are now working to form one for lithium - this speaks volumes. Sooner or later, those powerful Western entities (includes Aussies) will shift the balance and the focus will be American consumers not Chinese consumers. I reckon sooner than the market thinks. Hence my bullish focus on Prairie Project - I think the project is a catalyst to a much bigger wheel, not simply selling lithium. Much like VUL and EUR in Europe, AZL will be North America. And I like getting in early because that's where investors make the biggest of gains.
Have a nice weekend
(20min delay)