This is not directly related to PLS but is mentioned. Just a news article from Fastmarkets which shows current pricing and Alita's/A40's issues. This has a knock on effect to all Lithium Miners.
Alita suspends securities trading on dwindling lithium prices; continues spodumene production
Alita Resources, formerly known as Alliance Mineral Assets and listed on the Australian and Singaporean securities exchanges, has suspended the trading of its securities as of Wednesday August 14 on the lower lithium prices.
The company will be discussing its debt situation with lenders while negotiating with its spodumene offtake partners in the following weeks, Fastmarkets has learned.
Oversupply of lithium carbonate and hydroxide in the global market alongside lower-than-expected demand from the battery industry has been pushing down lithium prices over the past year.
Fastmarkets’ lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price exw domestic China has fallen by 36.22% year on year to 60,000-65,000 yuan ($8,506- 9,215) per tonne on August 8, from 94,000-102,000 yuan per tonne on August 2, 2018.
The lithium hydroxide monohydrate, 56.5% LiOH.H2O min, battery grade, exw China, spot pricehas also plunged by 44.23% over the same comparison to 70,000-75,000 yuan per tonne on August 8, from 125,000-135,000 yuan per tonne a year ago.
"The collapse of the lithium carbonate and hydroxide prices in China has caused Alita to stop trading," a source close to the company told Fastmarkets.
"The agreed floor price of $680 per tonne for Alita’s lithium spodumene has become unsustainable to our offtakers due to the lithium carbonate and hydroxide rapid price decrease in China over the course of the past year," the source added.
Alita produces lithium spodumene concentrate from its nameplate Bald Hill Mine in Western Australia. It has an offtake agreement in place with China’s Jiangxi Bao Lithium with a floor price of $680 per tonne for 80,000-100,000 tonnes in 2019.
To manage price risk, Alita will be selling close to 20,000 tonnes of lithium spodumene on a spot basis throughout 2019, the same source said.
Rapid price decreases in China for both lithium carbonate and hydroxide have had a direct effect on lithium spodumene prices over the past year, causing the assessment to fall almost on a monthly basis.
Lithium spodumene is an important source of feedstock to produce lithium chemicals in China and spodumene offtake prices are typically calculated against the market price of lithium carbonate and hydroxide in China.
Fastmarkets assessed the monthly spodumene (min 5-6% Li2O) contract price at $585-650 pertonne cif China on July 31, down from $600-670 per tonne on May 29.
But ongoing conversations with the market indicate the spodumene market is already trading slightly below Fastmarkets' latest price assessment.
"Alita could ask their offtakers to pay the bottom price agreed but current lithium carbonate and hydroxide prices in China would make this unsustainable for their offtake partner, therefore, Alita has been selling below the agreed floor priceof $680 per tonne," the source said.
A spodumene concentrate sale price of $680 per tonne could imply a final price of roughly $9,000 per tonne for lithium carbonate sold in China, providing very thin profit margins or even a loss for some converters in China, a spodumene concentrate producer in Australia told Fastmarkets.
Market sources spoken to by Fastmarkets pointed out that new contract and spot prices for lithium spodumene could be already as low as $530-630 per tonne on a cif China basis.
Lower lithium prices in China have also affected in recent months other spodumene producers in Australia such as Pilbara Minerals and Galaxy Resources.
Pilbara Minerals in Western Australia limited its spodumene production in June and July on reduced demand, while Galaxy Resources delayed a shipment of material in June to renegotiate terms with its offtaker.
"If you are not integrated in this business [lithium spodumene] you are highly vulnerable to price volatility,"another spodumene producer told Fastmarkets.
Fastmarkets understands Alita will continue to produce lithium spodumene and ship material into China.
As some here are well aware I have been following the lithium market for some time now. It is highly likely Alita will go bankrupt. High strip ratio mixed with poor pricing makes it a higher cost producer with little if any margin. PLS although lower costs of production will struggle as well. These low prices will be around for possibly the next 12 months. PLS pricing is linked to Ganfeng pricing mechanism and as such it is 6 months lagging. If prices improve it is 6 months before this flows through to PLS. So if prices stay low for the next 12 months which is what some analysts are saying then 18 months till PLS gains in spod pricing.
There will not be enough cash to repay the debt obligations with a tight margin.
PLS will have to do a Cap Raise in the not too distant future.
Now all the resident chest beaters will come on and attack what I have just said because I was invested with AVZ. That is no longer the case as i am almost fully in cash right now and have been for months. The market is about to take a nose dive off the ugly tree. Let's see how events unfold on 1st Sept.
PLS Price at posting:
47.0¢ Sentiment: Sell Disclosure: Not Held
(20min delay)