Hi
@CapitalKingThanks for your great insights mate.
Just for your info, I was a businessman and managed a large, very dynamic and volatile (in terms of price and technology) product range. Therefore I think I can feel what the LTR management feels and thinks atm.
When I said "I am hoping LTR will announce a serious amount of profit for Q4-2024. And that will shock the shorters and BEOT" on my post
#:76997483 on 11/12/2024, all downrampers attacked me. No worries I don't care about them. All on ignore. Here it is, LTR has a positive net cash flow and its real amount is more than $50m.
Why we have so much stockpiled ore which seems to be more than we can currently process? The reason we have stockpiled so much ore on the ROM pad (1.3mt @1.3% grade) which seems to be more than we can currently process is that
it is a cost control and contingency measure as you also said.
I don't think it's because of the shipments to Tesla will begin very soon.
We need to have at least 3 months of ore stockpile on the ROM pad (we have 6 months of stock by having 1.3mt ore though),
we also have to have some spod concentrate inventory (maybe >30kt) as finished product as well.
Every company in the lithium-battery supply chain must have a considerable inventory.
The total global inventory must be at least 15% of whole annual sales. These kind of inventories should be held all along the battery supply chain;
- We should have clean ore and spod concentrate inventory, and the finished saleable spod con. inventory.
- The refineries (Tesla's, LG's, or the Chinese chemical refineries which convert the spod concentrate to lithium carbonate or lithium hydroxide) must have a stockpile of spod concentrate inventory which they bought from the miner, and plus the saleable lithium carbonate and hydroxide inventory (as we keep the finished spod con. inventory)
- The cathode and electrolyte producer must have an inventory for lithium carbonate and hydroxide, plus the finished saleable cathode and electrolyte inventory.
- And the battery maker should also have the cathode and electrolyte inventories, plus the finished saleable battery inventory.
- Lastly, the EV maker needs to hold the battery inventory, and finished saleable EV inventory.
- Not to consider the inventory on the move; on port depots, on the ships, on trucks, on freight, etc
On top of all these, all of those producers (relatively to each other in downstream side) have to process those products and they have to have a inventory of those products in the process and production lines (in machines). Let's not forget all of those mines, plants, converters, production facilities and factories run for 24/7. They don't stop. When you completely shot down any of these facilities it's very expensive to start it again.
I believe LCE the inventory in total of the whole battery supply chain is at least around 15% of total annual sales. For example when you say the total LCE demand is 1.2mt in 2024 then the real supply to match it should be 15% more than that which makes it 1.38mt.
Inventories are dynamic; can go up an downHowever the inventories can be reduced to very low levels (5%) when the lithium demand is in bad sentiment (which is manipulated), but it may go very high (25%) when there is a less supply.
Inventories are ignore on forecasts by some analysts The inventory calculation is always deliberately ignored in the supply/demand balance forecasts by the insto analysts even though it's a key component in the lithium-battery supply chain.
Production losses (inefficiencies) are ignored on forecasts by some analysts The same issue is valid for the lithium-battery supply chain for the losses (negative efficiency rates) when producing a finished product from a raw material. That can be up to 25% producing lithium carbonate from spod concentrate. A low grade with high impurities spod con. might loss 25% of it in the refinery process. So when the analyst calculate the total spod con. they must consider the recovery rates.
When it comes to 1.3m @1.3% grade clean ore on ROM pad (feedstock to produce spod con.), yes it's a lot. They can make more than 200kt spod con with that.
Grade and recovery rate are main factors for low cost productionTony Ottaviano couple of time pointed out the importance of grade and recovery rate as you know. He was very right. But the market and most analysts still not don't understand the importance of those technical issues.
For example you can produce a low cost spod con. with 1%-1.10% feedstock ore in today's terms. That's why Wodgina and Pilgan (PLS) mines cant have any less than US$900/t cost. MIN has already said they had AIC over US$900/t, but PLS doesn't tell that clearly. PLS was mining its 1.5% ore recently despite their ave. grade is 1.15% but they have to process the low grade ore at one stage. If they want to process high grade ore either they would have to move huge amount of waste material which would increase their cost a lot or they have to go underground mining which is impossible. So they will have to process low grade from now on.
The grade changes the ore feed and recovery rate.
And that changes the finished product;
SPOD CONCENTRATE COST!For example Greenbushes uses 2.2% ore and they only have to feed 3.5t-4t of ore to the plant. That change the process time and the cost of spod is being very low even though their plant is very old and full of upgraded machines. It's a kind of another mess. But the ore grade is very high. (But remember my post that Greenbushes will run out of its HG ore around 2031.)
So grade is everything.
This is the fundamental formula below if you are interested in.
For having a high grade spod concentrate; You have to do one these or combination of these;
- feed high grade ore,
- increase the ore feed (plant feed) or
- increase the recovery rate of the plant (not easy, needs a good design as we have at KV)
For example, the below table shows what we were doing in month of Dec.2024 during production.
- We were feeding 1.2% grade ore,
- Plant recovery was 59%,
- final product spod con. grade was 5.2%
But we were feeding 7.3t of ore to the plant to get 1t of 5.2% spod con. That means our cost was not that low in comparison to feeding higher grade ore at higher recovery.
Or we can get the same results by entering the end results to find out the plant recovery.
When it comes to new ore grade of 1.3% and higher recovery rate of 65%;
Here is the new results for having the same spod con grade of 5.2%.
We will feed less ore to the plant; only 6.1t. That drives the cost down more.
If you ask how can we achieve ave. 65% recovery rate in Q1-2025!
The answer is in this graphic given by LTR on last preso.
The dark blue marking is mine.
As a result, it's obvious that our production cost per unit of spod con. in March 2025 quarter will much lower than Dec.2024 quarter.
"whether we could increase our nameplate capacity to 4mtpa now!"No I wouldn't. We already have that capacity embedded in our plant, It's easy for us to increase it to 4mt ore feed to plant to get 700lt spod concentrate per annum.
What
@yaschmidt said on his
Post #:77544814 is correct; "
To get from 3 mtpa to 4 mtpa, the only real CAPEX is that we need to build a second paste fill plant with an estimated cost of A$66M. All the other capacity (mills, processing equipment, electrical infrastructure, etc.) is already in place". Only thing I'm not sure is the cost of the second plant might not be $66m but might be much cheaper, because on the anns on May 10 2024 it was said the cost of 2 paste plant would be $71m.
"
The past plant was a standalone project, would include two trains capable of producing up to 160m3 of paste per hour and had been designed to accommodate future expansion of mining operations to 4Mtpa... With the second train brought forward to provide latent capacity to derisk underground mining operations, enable water recovery and to capture cost economies associated with constructing the two trains together. Valued at approximately $71 million"
Anyway, I would prefer to be prudent and wait for the spod prices to go up much more than this. I 'd like to see it over US$1,200/t for doing that. Or I'd like to have at least $500m in bank before doing that (we already have $190m).
The reason is this;
I was saying all along the way in last 6 months that Australian spod producers were stupidly selling their spod cheap, they sell the same volume at much cheaper price despite China was buying more than they were buying in 2022.
(actually only Greenbushes and PLS have increased their output, while the others cut the production).
I defended the idea that Aust spod producers should reduce their outputs to get the spod price increase. Greenbushes and PLS did the opposite, they increased their outputs. I could understand Greenbushes is in Chinese control but what the heck PLS increased their output even though they were making loss. That has been my main critics about PLS management, otherwise I like PLS as a company because it's Australian. That's why I talked negative about what PLS was doing because the PLS management was not acting in the benefit of Australian lithium industry IMO.
So, I wouldn't want LTR to increase its plant ore feed capacity to 4mt to increase spod con output as it's planned before. Let's wait and see how quickly the spod price goes up, and where it goes to. We are OK now. We will make little profit but we will be safe in any case. We have to be prudent.
You have to make profit for staying alive. We are making it now. We have very limited risk for the spod price now.
LTR has proved that only Greenbushes and LTR are making money in Australia atm. We have to keep our position and keep producing, keep making more fine tuning, keep increasing our recovery rate, keep digging deeper in the U/G, and keep increasing our knowledge and relations in the lithium supply chain.
Even with the current nameplate capacity (around 500kt per annum or 42kt per month) which we have nearly reached, we will be able to make a lot of money, maybe a billion dollar if the spod price goes over USD$2000/t. So I wouldn't take any risk anymore.
However it'll be very easy and quick to increase the plant capacity to 4mt at any time. We can even increase it much higher in the future (see the plant design, there is a lot more space to add another production line).
I'm sure that we will see a supply deficit in 2025.
And the lithium price will start increasing exactly as it happened in the first half of 2021, then peaked at the end of 2022. I have done my calculations. I'm sure about that.
However I'd just wait and see the whole market recognises and acknowledges that, and the Chinese buyers start buying in auctions at much higher prices (as seen on Albemarle auction recently).
I'm mostly interested in the demand side. I know the supply will never be enough at these low lithium prices. It's simply impossible to make any new investment neither for an expansion on a brownfield and a new mine on a greenfield because the incentive price is at least around US$1,200/t.
Here is my LCE demand calculation up to 2030.
It's the total of 3 parts;
- EVs (Passenger vehicles)
- BESS (Battery Energy Storage Systems)
- Other vehicles (Semitrucks, Utes, Scooters, bikes, Large vessels, Motor yachts, sailboats, caravans, etc)
This is a very conservative calculation. As you can see the EV growth rate is slowing down in last 5 years. The years 2022, 2023 and 2024 are actual numbers.
The EV sales will be in parity with ICE vehicle sales in 2030 (50%-50%). As you know it's over 53% in China atm. (Total passenger vehicle sales will be around 90m in 2030)
The 15% inventory share is
ignored on this table.
The production losses is also
ignored on this table.
As you can see the LCE demand will be 1.4mt in 2025. - Add 10% inventory part on top that: 140kt
- Add at least 5% production losses on top of that: 70kt(10% for spod but nothing considered for lithium carbonate produced from brine. So ave. is 5%)
The total LCE demand in 2025 comes to 1.6mt plus. I don't know any mines to meet that demand in 2025.
I request the downrampers or the insto analysts to com up with a detailed supply table to challenge me.I don't know who is going to supply 3.2mt LCE in 2030..!(add inventory and production losses)
That's a mystery.
That's why I don't want to increase KV projects spod output to 700kt (or 4mt ore feed) for now. No need to hurry. Let's wait and see how the Chinese lithium-battery supply chain will react to these numbers.Have a good weekend.
Cheers
PS: This article was posted here before. It also demonstrates some numbers similar to mine.
"
Lithium Market in 2025 and Beyond: Supply Deficit Looms with $116B Requirement" Jan.13 2025.
The table below by S&P Market Intelligence Bloomberg. LCE demand for 2025 is very close to my calculation as you can see.
The table below is by Benchmark Mineral Intelligence. 2030 lithium demand base case scenario is also very close to my calculation.
(20min delay)