QUOTE="Names little, post: 37036229, member: 188357"]Hi Henry, it's likely a thing called competitive advantage, if AJM and PLS have a lower cost structure than others it gives them the ability to undercut the market and expand volumes at the expense of others, whilst still maintaining profitability (refer that AJM announcement that shipments are generating positive cashflow) If your price assumptions are correct and both PLS/AJM are able to sell at those prices you mentioned it doesn't bode well for higher cost producers (look out for those with high strip ratios to determine these as that seems to be a big factor in determining cost from what I have gathered from my readings on HC) ) as they become increasingly uncompetitive. And of course the existing customers of these higher cost producers may then start to suffer if they are continually paying higher prices than their competitors for what is basically the same product. So it becomes a double edged sword for these higher cost producers, higher costs and increasing pressure from their customers to cut prices.
Anyway just think of BHP/RIO strategy of continuing to pump out volume at lower margins and what that did to the higher cost producers such as AGO and others.
And interestingly those selling prices you mention are all within the Feasibility study parameters from memory.
So do you think AJM/PLS should put their prices up to assist the higher cost producers or should they operate at high margins whilst still allowing their customers to be competitive in the Lithium processing field? It will be interesting to see how those processors that may be paying higher prices than the likes of Ganfeng under PLS/AJM agreements will remain competitive when their competitors are getting the raw material so much cheaper (assuming your pricing statements are correct).
Curious on your thoughts on how you see it playing out.
Thanks[/QUOTE]
Ouch
AJM Price at posting:
16.5¢ Sentiment: Buy Disclosure: Held
QUOTE="Names little, post: 37036229, member: 188357"]Hi Henry, it's likely a thing called competitive advantage, if AJM and PLS have a lower cost structure than others it gives them the ability to undercut the market and expand volumes at the expense of others, whilst still maintaining profitability (refer that AJM announcement that shipments are generating positive cashflow) If your price assumptions are correct and both PLS/AJM are able to sell at those prices you mentioned it doesn't bode well for higher cost producers (look out for those with high strip ratios to determine these as that seems to be a big factor in determining cost from what I have gathered from my readings on HC) ) as they become increasingly uncompetitive. And of course the existing customers of these higher cost producers may then start to suffer if they are continually paying higher prices than their competitors for what is basically the same product. So it becomes a double edged sword for these higher cost producers, higher costs and increasing pressure from their customers to cut prices.
