Ann: Project and Funding Update, page-564

Woodmac forecast is very very “creative” and unrealistic, in my view.
They changed forecast dramatically just in a few months, how can they correctly predict lithium price long term? The spodumene concentrate price of US$950/t until 2028, is completely a joke. Don’t forget spodumene concentrate price hit US$8,000/t just over a year ago. The more important, at concentrate price of US$950, the African projects are not making any profit, including Acadia and Bikita (currently two main African lithium mines).
Bear in mind, Huayou had already fired around 164 employees and downsized Acadia projects from 1 January 2024, and saying company was making a loss. Bikita mine owned by Sinomine, no change of mine operation has been publicly reported so far.

As to China lepidolite production, existing miners, are expanding, but only 10-30ktpa LCE, not massive, and more realistic. The existing biggest player, Yongxin, has the best extract technology, they process 120 tons of ores to produce 1 ton of lithium carbonate, with the lowest all in cost of around CNY 70,000/t.

The two big ambitious newcomers are CATL and Gotion, two Chinese battery producers. Each owns a very low grade lithium project, with ore grade of 0.27% Li2O, and has a plan to develop up to 120ktpa LCE. It’s funny, same low grade, with same annual production target.

CATL owns 65% of the lepidolite project, ore grade is very very low, only 0.27% Li2O. Their three stage development had been delayed due to permits and environment issues. They need to process 300 tons of ores to enable producing 1 ton of lithium carbonate, all in cost (over CNY 125,000/t) to produce one ton lithium carbonate, is well above currently spot lithium carbonate price (CNY 98,000/t). Some conservative analyst believes CATL all in cost to produce one ton of lithium carbonate, could be as high as CNY 195,000/ton, and real annual capacity at maximum would be 84ktpa LCE (rather than 120ktpa). CATL is building three converter plants with total capacity of 100ktpa LCE. So the 120ktpa nameplate is obviously inflated, imo. CATL has to pay Royalties between CNY 10,000 and CNY 30,000 to the government.
The interesting part, CATL did say, if lithium price were low, they would rather buy lithium on market. So let’s wait and see how much they will actually produce at current market conditions.

Gotion is in a much weak position, same low grade 0.27% Li2O lepidolite project, it would be lucky to see if they can develop 50ktpa LCE mine.

BUT the independent agent is counting on full capacity from CATL and Gotion, that’s hefty 240ktpa LCE. BUT in reality, I’d say only a fraction of that building capacity will eventuate especially at a heavy loss to produce lithium carbonate due to their high production cost, imo.

All in all, African lithium projects and lepidolite projects are NOT sticky, simply due to economic viability. Huayou’s Acadia has downsized (from January 2024), some lepidolite producers have already cut production or shut down since last October.

Here's iron ore price chart,



Iron ore price dropped over 75% to US$39/t in early December 2015, Goldman Sachs updated their forecast, lowered 2016 iron ore price to US$38/t, and tipped US$35/t for 2017 and 2018. But iron ore price bounced hard after their update, hit US$71/t in April 2016 and US$95 in February 2017.

FMG was a high cost producer, with net debt of around $8B, their share price hit $1.34 in January 2016, with market cap of around $4.4B. Because if iron ore price were below US$40/t as GS predicted, FMG could be on the brink of bankruptcy. At that time, FMG's break even 62% iron ore price was around US$39/t. So it was unlikely to serve $11B debts. But here's FMG share price performance,



FMG share price hit low in January 2016: $1.34;
Bounced to $3.65 in April 2016;
Further rose to $7.27 in February 2017.



Crude oil price also had a historical drop to below zero, but like iron ore price, any massive drop/crash (over 75% drop), always is Short-lived, those cycle low price usually only last for few months.
Lithium price dropped over 80% since late 2022, spodumene concentrate price dropped from as high as US$8,000/t to currently ~US$900/t, that's 88% drop, definitely will not last for long. Bear in mind, African lithium projects and majority of Chinese lepidolite projects will not be making any profit at current lithium price. So Goldman Sachs and Wood Mac 's assumptions are totally wrong, in my view. Just like iron ore cycle in 2015/2016, where institutions forecast iron ore price will be very low, never never will say US$100/t again, BUT, iron ore price hit US$100/t three years later, in 2019, more insanely, iron ore price hit record high of US$229/t in 2021, currently sitting well above US$100/t, despite of all big producers cost is around US$20/t.

Another interesting part, GS forecast iron ore was in an oversupply of around 250 million tons (around 18% of the global supply) in 2015. Then GS said just weeks ago, lithium had around 18% oversupply issue as well. Did they just copy the iron ore forecast or they do like 18%??? In 2016, only BCI etc, shut down production, 15 million tons iron ore supply were off the market, but Gina's Roy Hill came on line in January 2016, extra 55 million tons iron ore supply. Total production in 2016 was actually increasing a bit, that did not halt iron ore price to recover during 2016.




Lithium demand rises significantly due to massive EV sales growth led by China,
During last lithium cycle 2017, EV sales were actually not happening that much. But this time, EV sales are real. 2023 global EV sales were around 14.5m. 2024 global EV sales are likely to be around 18-20m.
China NEV sales: 2022: 6.8m; 2023: 9.5m; 2024: 11.5m (official forecast, usually conservative) - 13m.







Chinese new year is on 10 February 2024;
Gina's free to offer date: 11 February 2024.

SQM and Gina are currently buying 60% of the Andover project (around 5 years away from the production) for $1.7B, valuing the whole project at $2.8B.
LTR, currently market cap $2.2B, including spending $1B to develop and build the mine, if less the $1B development costs/capex, LTR is currently valued at $1.5B (added back $300m debt).
So more advantage stage LTR is only valued at $1.5B Vs early stage Andover at $2.8B.

Will Australian richest person be interested in buying remaining 80.1% of the LTR?
As she just paid 3 times price ($3) just 3 months ago!

All imo.
Happy Australian Day ALL!