Ann: Update on Kalgoorlie Acid Supply Arrangements, page-20

It's Sunday evening here in the USA, and I simply can't watch another moment of NON news regarding Mr. Trump and the events of this weekend. However, luckily, I have been keeping an eye on the board and the discussion about BHP and the sulphuric acid issue between them and LYC. I have two points here, and i hope you will indulge me.

The first is the supply of acid to Lynas Kalgoorie. BHP, a 160 billion market cap company, would most likely view this contract as a non material entity. Sulphuric acid is NOT in short supply, and companies like BHP would rather absorb a net loss to comply with the contract rather than enlisting a new lawsuit for breach of contract. A lawsuit of this type could only open up anti-competitive issues, antitrust (as they are also NYSE) listed, and a whole host of other nasty complaints not worth their time. Companies of this size, have "loss" provisions built into their financial statements to cover for these eventualities, and as they are selling the product to LYC, their only financial outlay is some additional freight from a longer distance. This will not keep the CEO of BHP from a good night's sleep, to be sure. As this discussion devolves to ideas about Force Majeure and buying acids from China, it's good to keep things in perspective. BHP has substantial investments in copper production in South Australia. not only is sulphuric acid used in copper processing, but copper mining actually produces sulphuric acid trails, which can be used or sold off-site. I was at the BHP site, and below is a graphic of their nickel (WA) and copper (SA) properties. So, the issue of NOT supplying is utter nonsense. LYC will get the acid they need.

However, I am more generally interested in their decision to shutter their ongoing nickel production in WA. BHP has an average 35-45% ROI for the metals it mine. Currently, it is only yielding 8% gross profit for Nickel. They blame this on low commodity prices and over production/stockpiles. Of all the comments regarding this issue, I have yet to hear anyone raise this issue. Because had they, yhey would find this:

Nickel is a key component in lithium-ion batteries, which are the power source for electric vehicles (EVs). Nickel's properties, such as its energy density and capacity retention, make it essential for EV battery manufacturing. Adding more nickel to the cathode of a battery can significantly increase its ability to store energy, which can increase the EV's range. For example, the Tesla Model Y's luxury SUV version uses a nickel-based battery and can go from 0 to 60 mph in 3.5 seconds. 

So, in part, the reason for the sulphuric acid shortage in WA is because of sluggish demand. In some large part, due to sluggish EV battery demand.

So, to conclude, I believe that the BHP acid supply issue is not a factor to worry over. However, the dramatic decline in nickel prices, much like our RE prices, are just in the basement. What we should be discussing is how long this bottom will be in place, and if money will be put to better use away from Lynas, until the industry has truly bottomed out. Anyone who can "call" that bottom and invest at that time will deserve some enormous returns on their investments.