Some thoughts .. also some reading between the lines
@AvalonDays but some different inferences.
The Good
- Production has remained the same (and hasn't had another unplanned hick-up)
- Lower A$ will help with A$price (but we knew that already)
The Bad
- Recoveries:
- No improvement, implication being ~63%
- No longer saying "100% of the designed product recovery design (of 75%) by end of calendar year 2019" ... instead saying "lithia recovery of approximately 75%" and this "following completion of plant improvementworks ...".
- Reading between the lines ... I think PLS is now doubting that they'll ever get to 75% and they're flagging more capital to improve recoveries.
- US$ Price:
- Guidance is down further (previously PLS suggested prices had bottomed) - part of this is due to the appreciation of the US$ vs Yuan and would be offset by the A$ fall. However, the last last time actual average price came in at low end of PLS's guidance range so risk that this will happen again (particularly as they're flagging spot/distressed sales)
- Chinese customers delaying orders in a falling market - who would have thunk that? They've been playing that game since I was a boy (and probably before then). PLS have set themselves up for this on trick with prices set from the qrt before ... so expect lots of interest from the Chinese in a rising market.
- "Working with customers" ... is this code for discounts and concessions?
- Opaque supply deals where customers seem to have got the better of PLS
- Previous concern re: ... lower prices PLS achieved vs say MIN and concern about PLS being structurally committed to Carb rather than Hydroxide prices.
- Previously concern re: heralded floor price appearing to be very low
- .. And now ... PLS the "Stage 1 and 2spodumene concentrate100% under agreement" appears to be more a free "call option agreement" in favour of its customers than a "sales agreement" that commits both parties.
The interesting
- PLS had previously promoted the value of a Li-hydroxide plant with Posco as an "Option to participate" ... and implied that the value was high so left out of any sale agreement etc etc
- Now PLS states "complete both the detailed joint venture shareholders agreement and POSLXlicencing agreement by the end of June". There is no talk about the commercial terms being already agreed etc .. so looking back, it appears that what PLS previously called its "Option" was possibly something more akin to a MoU with an open ended amount for Posco to charge license fees. Reading between the lines ... IMO Posco is likely to have the upper hand in negotiating this deal. I suppose we'll find out fairly soon.
I'm getting very concerned about PLS management's ability to negotiate robust agreements, particularly with the Chinese.
For all these reasons, I'm in no hurry to jump in.
(20min delay)