Agreed. AVZ Power is a good move from AVZ.
Brine deposits are good, but historical experience told us, expansion is not easy to achieve full nameplate: SQM expanded their nameplate to 70kt p.a last year, but actual output was only 45kt. Plans to expand to 120kt in 2019, but expected to 60kt LCE in 2019.
I believe lithium sector has experienced a very similar cycle as iron ore.
Some facts for thoughts:
- iron ore requires relatively larger capex,
- big producers had already achieved very low cash production cost,
- slowdown Chinese economy casted worry for future demand,
- oversupply as big four kept expanding output,
- iron ore price kept dropping, causing more pessimistic outlook, iron ore would be under USD$30/dmt, never going back to USD$60, no way to USD$100... (but iron ore price fetched USD$100/t this month)
- huge profit margin for big iron ore producers (even FMG, was doomed, now C1 cost is A SD$13/t)
- China heavily rely on import for iron ore to meet demand: around 70%
- China heavily rely on import for lithium to meet demand: around 85% in 2018 where new energy vehicle sales just reached 1.25m last year. (Bloomberg NEF, on 21 May 2019, released a report and forecast new energy vehicle annual sales to reach 28m units by 2030, 56m by 2040), by then, who still have large lithium deposit left to be mined? Greenbushes might be close to finish?
Some more good readings.
You can use google translate, right click , translate to English,
https://www.autohome.com.cn/news/201905/936589.htmlhttps://m.wallstreetcn.com/articles/3491789Have a good weekend.
