Ann: December 2020 Quarterly Activities Report, page-124

I am possibly the wrong person to ask about additional shipping costs from Pt Hedland to Europe. I could post the shipping costs from memory but would prefer not to inadvertently mislead. Perhaps @8horse or @nightflyer have that info at hand.

What I would suggest is European customers will likely act in a free market manner in the long run. If they need to import from Australia they will have to offer more on a CIF delivered basis than Chinese customers to compensate for the added cost of freight.

On the other hand, if altenative supply is developed exporting from a port in West Africa, as is currently being proposed by a couple of juniors, then Aus producers will need to compete and match pricing from those closer producers. There are also some European Juniors looking to develop.

To satisfy a request I should mention AMG with their existing Brazilian spodumene concentrate operation from it's Mibra mine. It is currently expanding to meet added requests for product from their offtakers and is growing to a scale that deserves greater recognition. Their output is not insignificant but currently pales in comparison to that of WA. It is a newer operation that appears capable of competing on both cost and quality with WA independents. Also of note in Brazil are the ambitions of Sigma that have funding for construction of a 220ktpa operation and have been operating a pilot plant.

In that case a company such as PLS would have to make the decision to wear the additional cost of freight in order to diversify their customer base away from China or to chase market share.

I assume in the medium term, without a closer alternative to WA supply, delivered EU pricing will be higher than China. While I did make previous mention of free market behaviour, it is also possible that in the medium term the EU will subsidise local conversion that could in turn pass on some of that support by paying a premium for SC6 to obtain the needed precursor at a competitive price point.

My personal preference for PLS would be to continue to seek relationships outside of China but within Asia, such as the long awaited potential POSCO JV in South Korea or Indonesia that are attracting attention by leveraging local Nickel to attract a battery materials manufacturing industry.

Exports to the subcontinent may also become another attractive alternative to Asia for Australian producers if India can fulfil it's dreams.

A final option that I am a little cold about would be a converter in Australia. From what I have seen from a cost point of view, without government support it is not a particularly attractive alternative to offshore conversion. Environmental hurdles add risk and costs and it should be noted there is no real market for byproducts of the SC conversion process such as Quartz (Silica) locally.

For the time being there remains little choice for independent producers but to sell to Chinese customers as adequate independent conversion facilities do not exist elsewhere. That is highly likely to change in the next 2 to 3 years.