Seems you might have got a bit of flak for this post mate, the way I see it....thanks for posting. It is important for us all to keep track of our competitors to see what they are doing operationally. There are a bunch of theories out there at the moment as to why the lithium price is suppressed, the notable ones are:
1.US China trade war has squashed global sentiment and slowed down production
2. The Chinese created an oversupply in order to suppress the market and buy into lithium producers at a much cheaper rate...this is brilliant albeit underhanded, and
3. Producers were in such a rush to get their product to market, they created an oversupply which has depressed prices.
Either way, in my mind, if the bigger producers are slowing down production, this is great for CXO. The pricing of Lithium is based simply on supply and demand, if demand is high and supply low, prices go up. If supply is high and demand is low, then prices go down. Limiting production makes the first scenario the reality, which means that prices can only go up - remembering that the supply and demand curve is not perfectly elastic, i.e. an increase in demand is not automatically met with an increase in supply. It takes time for the increase in supply to occur (prices spike upward) and then it will likely over shoot (prices go downward), and then it will equalise at some point (prices will stabilise). The moral of the story here is that no matter why the prices are suppressed, the only way to get prices back up is to ensure that at the very least, supply only equals demand and does not exceed it - limiting production is the only way that Australian producers can put the ball back in their court and have more influence in the market.
Producers are in the box seat here, the drive for electric everything is coming and without the product in the ground the evolution goes no where. The market might have been sold that finance is everything, but this is a short-term view in my mind......the product is what creates the technology, finance is just the enabler to get the product. This view will end when the uptake to electric everything really takes hold. I look at my life, I am waiting to upgrade my other half’s car for the time that the electric vehicles are slightly more affordable and have better performance specs (probably about three years), and we are moving soon, and my goal is for at least a 7kw solar system with one or two batteries. This is because I genuinely want to reduce the impact of global warming, and I would really like to reduce both rising fuel and power costs. I suspect most of the investors in CXO have similar ambitions. The funny thing with this whole deal is that as people swap to clean energy and fuel, the prices of fossil energy and fuel will only become more expensive (less users means higher cost per remaining users), so those that don't change will get left behind.
Everything is working out (in the big picture) at the right time for CXO to enter the market as a producer (reduction in global supply/uptake of electric everything). By the time we are in production (say mid 2020), supply should not be exceeding demand, and prices should be on the increase. This means we will be selling our product at a good price and there will be no shortage of buyers. We are poised for success and a decent appreciation in share price. I did some rough CONSERVATIVE numbers tonight 175,000t x $300 per tonne (600 sale price - 300 per tonne costs) = ~52m profit per year - this is about 6.7c per share perpetual dividend, at a 10% required rate of return, this creates a SP of approx 60c. I wouldn't expect that CXO will release a dividend of that size, but the estimated SP is about right in full production IMO based on current targets. I am a little concerned about rising staff and corporate costs in the latest quarterly (about 2.5m per year now), but I am withholding judgement at the minute as the company is developing....but the costs are definitely something to watch especially when we are not making a profit.
I read over the Yahua agreement again the other day, and in order to access the prepayment facility, we need to have FID by 31 Dec 2019. I think we might be in for a big next four weeks. We will hopefully see NT gov approvals coming through (I can't see any reason why they wouldn't give we have environmental approval), then some finance arrangements, then FID.....then we are off!
There has been a bit of pain so far with this stock, but it cannot last forever, the electric r/evolution is coming!
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