Ann: Corporate and Operations Update, page-173

Good post SF120!

There is an emotional component of the sell down, however there’s also definitely fundamental problems that everyone is concerned about.

1. Short to medium term oversupply of spodumene. People fear that high cost producers will be wiped out of the market, and unfortunately A40 belongs to one of the higher cost camps. Without fines circuit and ramp up production, the cost will remain high.

2. Debt covenant is just a reminder to share holders how vulnerable the company’s balance sheet is. Without regular shipments, there is a constant threat of drying up.

3. Off take agreements. This is kind of related to market sentiment, but partnership with Jiangte does not provide much confidence, given the history of repeated delay in taking shipments. If the offtake is with Ganfeng and we managed to ship 30kt/month regularly like MIN, there will be a problem at all.

4. The Hydroxide JV is great but will not solve the short term problems. Currently lithium hydroxide price is also under great pressure. If the JV could produce hydroxide but could not sell it promptly in the market, it still doesn’t change the situation.


5. Exploration upside is enormous for bald hill, but until that has been drilled and proven, it is as good as nothing.


I ve been reading some lithium market updates in China and there is an overwhelming pessimistic sentiment in the short to median term.
Lower EV subsidies has a material impact on the car makers’ production numbers, which is expected to worsen in the second half of the year (subsidies step down in Jun).
Theres also strong pressure for the ICE car dealers to destock the older generation of ICE cars that does not
meet the new emission requirements (the China 6 Standard). So the old generation (China 5) cars are being sold at ridiculous discounts to clear the inventory.
This will also likely soften demands for EVs.

Maybe other markets especially Europe will pick up the demands, but this is not happening until 2020-2021 period.

Short term lithium market is pretty gloom in my opinion.

I have sold a substantial amount of my holdings at a loss. Hoping to reenter when the market condition is better.