I believe currently A40 is oversold and fair valuation should be closer to 20 cents. GXY and Jiangte wouldn't have put their money in without due diligence.
The issue that A40 faces currently is sales.
I see signs of offtake agreement been signed in the September quarter, presumably with the Korean offtaker , 20 to 40 kt/ year
" includingadvanced negotiations with a large Asian corporation for the supply of spodumene concentrate (initially inthe range of 20,000t to 40,000t per annum commencing in late 2019 or early 2020)"
"Negotiations on the lithium hydroxide downstream joint venture agreement with Jiangxi Special Electric Motor Co., Ltd andOfftake negotiations for the unallocated long-term production expected to be completed during the September quarter."
Out of the two promises the company has just delivered the JV agreement.
Although the company has not been good at keeping their timelines, previous quarterly report has been using words like "substantially completed in the quarter" or "significantly progressed in the quarter". The wording in the quarterly report sounds more confident that this offtake will complete in September quarter, although this is purely speculative. There are also signs of increasing market demands for spodumene in 2020. Other producers including AJM and PLS has also recently signed new offtakes, though both at much lower tonnage than the previous offtakes signed in 2017 or 2018, so I believe a new offtake agreement of 20-40kt/ year is within reasonable reach.
I believe the board needs to work hard to sell the remaining stockpile aggressively. The balance sheet will look much better if the spodumene stock is monetized.
Production wise no surprises, no shocks. Cash cost of USD $545/ton is inline with guidance. PLS also reported similar figures of production cost. Most new miners will not be profitable at this cost and price levels.
Pretty disappointing quarterly report but nothing unexpected. Price is too low and I believe it's oversold. Not a good investment if the investment horizon is short months. Might be a good entry point for anyone prepared to hold until next year.
