ASX Today, page-36945

I'd like to quote Ken Brinsden said just days ago,

“They’re the projects that have the 600,000-1Mt equivalent spodumene production capacity. The analogy I often use is to say they’re like the Mining Area C or Yandis of the iron ore world — mega mega mines.

“With EV sales at let’s say 30% growth you can you use that as a rough proxy for where it’s all at. When the industry is growing at that pace downstream it is virtually impossible for the raw material world to keep up with.
“What we’re seeing here is a bit of an air pocket in the combination of China talking the price down and drawing down stocks as compared to there being an outright glut of new lithium raw material coming through.
“So my take on where the industry is at is, in fact, there will be a correction and there’s a reasonable chance that will be pretty significant when it comes back, because of the after effects of that shock.
“China’s overplayed its hand and we’ll see, a reasonably significant price appreciation within a relatively short period of time on the proviso that the industry continues to grow at that pace.
“So what that translates to is if if it’s 30% growth downstream, that’s telling you that you need a minimum of new production in lithium raw materials of about 300-350,000 lithium carbonate equivalent tonnes (a year).
“That is three Pilgangooras in one year. So the reality is when that happens, the industry can’t deliver it.”


LTR's KV initial annual capacity is 600,000 tons spodumene concentrates (3Mtpa processing capacity), will upgrade to 700,000 tons spodumene concentrates per year. So KV is a mega mine.

As I believe there're many similarities between iron ore and lithium, mainly both demand driven by China; China is lack of high grade/quality lithium projects (similarly to iron ore, China has low grade iron ore deposits with very high production costs); and China is highly depending on importing iron ore to meet demand (Similarly China highly depends on importing lithium concentrates to produce lithium chemicals, both around 80% import dependence).

Iron ore price was only around US$15/t before China demand came in, then soared to US$200/t; during the GFC, iron ore price dropped to US$63/t (-68.5%), then bounced to US$195/t just in two years; then dropped to US$39/t in early December 2015, then Goldmans Sachs forecast iron ore price would be US$38/t for 2016, US$35/t for 2017 and 2018. BUT reality was iron ore price only lasted for two months at around US$40/t, bounced to US$95/t in 14 months which was far higher than GS' forecast of US$35/t.

Also, during 2015-2016, few institutions predicted, iron ore price would never see US$100/t again. But iron ore price fetched US$100/t in three years, surprisingly, iron ore price hit all time high of US$229/t in 2021, currently iron ore price sitting around US$128/ton. Where production costs of the global big producers are under US$20/t.



FMG market cap was down to $4B (share price $1.4), with net debt of $8B, they were almost break even while iron ore price was down to US$39/t as their cost was high at that time. Here's FMG share price,


FMG market cap fetches $91B today, although iron ore price isn't sitting at all time high.


Lithium price was around CNY 40,000/t before EV demand started, first big spike was in around 2017, China lithium carbonate price soared to around CNY 175,000 per ton, but during 2017-2020, global EV sales were not fast growing as expected, lithium carbonate price dropped back to around CNY 40,000/t, but since EV sales growth exploded in China, lithium carbonate price soared to as high as CNY 600,000/t (up 14 times, iron ore price up 13 times). Currently lithium carbonate price dropped to CNY 86,000/t in early December 2023 (similar to iron ore price bottomed in early December 2015, imo), now lithium carbonate price hovering around CNY 100,000/t,


Iron ore price was hovering around US$40/t for two months since bottomed in early December 2015, bounced over to US$60/t just after China New Year 8 February 2016.

This Chinese New Year is 10 February 2024, so I expect lithium carbonate price to bounce after that time.
Also, 11 February 2024, Gina is free to bid any price as four months expired.
Gina made a profit of $5B last year, and had $19.9B cash as at 30 June 2023 as AFR reported.
She paid average price around $2.95 for 438m LTR shares, added additional top-up on the $1.8 raising, her average purchase price is around $2.85/share. Currently LTR share price is 66% cheaper than her purchase cost.
She and SQM is still acquiring AZS at a premium price, $1.7B for 60% of the Andover project (which is still at early stage without announcing maiden resource). LTR's KV had 72% construction completion as at 31 December 2023, with around $1B cash spent/spending on the development and construction, currently LTR's market cap is $2.36B. (Vs 60% of Andover for $1.7B).

Bear in mind, lithium carbonate price has been hovering around at current low level (over 80% off the peak price) for almost two months now, and China new year is next Saturday! Very low price is usually only lasting for less than three months!

The financing deal is scheduled to update by 31 March 2024. By then, if following the iron ore cycle, lithium price would have already bounced, if Gina weren't making any moves; recovering lithium price would help negotiating the deal.

Always DYOR. ALL IMO.