CHR (ASX) Ann: RC Drilling Recommences at Lake Johnston

Originally posted by WhatsTheTip: ↑

I think you are applying way too much confidence in the comments provided by Matt Fernley of battery metal review.

Many of the African projects have ugly transportation logistics and lack major mining infrastructure support of WA. With the exception of Ewoyaa in Ghana, the countries they operate in don't even have a coastline, let alone the deposit being near to the coast. Many of the projects are very new so they are at their first cut-back so the massive costs that come from addressing the 2nd, 3rd, 4th etc cut-back to get to progressively deeper portions of the ore body are yet to appear in their cost structures. Given the best lithium is hosted in pegmatites which are magma flow's from deep underground, any surface areas of mineralised pegmatite are likely to be fairly quickly worked out. At surface supply is not long-term supply. One set of commentators had done so much research on the subject they considered Mali and Zimbabwe would use the same transportation corridors (these two countries are further apart than Sydney and Perth).

The immediate situation faced by lithium is super high prices from circa 2021 and 2022 caused almost all FID ready projects with even half-way sensible economics to start, many of them in a narrow 9-month window from late 2021 to mid 2022. Those projects are now all coming online at a relatively similar time meaning that while demand is growing rapidly, so is supply and no pricing pressure is emerging from the demand growth. This situation will not continue because the number of projects starting after mid 2022 has severely dropped away and new starts since 2022 are massively short of demand growth. The continuation of demand growth and lack of supply growth since 2022 is IMO going to cause a tight market and this tight market could be much sooner than some of the loony comments circulating. Many of these loony huge over-supply comments assume all new projects will continue to hit their timelines and raise the capital to get into production easily and quickly. They will do this while prices remain low and their supply is what will keep prices low.

Despite the decisions to commence supply being needed often 2 or more years in advance of any supply from the project, they have the effective assumption that planning 2 years ahead is perfect. IMO won't happen and the cycles will continue, we are just around the bottom of one of the cycles now.

Some of these supply cuts recently are by companies that are big enough they could have maintained production fairly easily. Lithium like Oil has a very steep demand curve. If prices increase it doesn't cause demand to fall away quickly. What this means is if the major's reduce supply by 10% or 15%, they may well end up increasing profits on their remaining 85-90% of production by 50%. The pathway to higher profits is actually reducing supply. OPEC has realised this for years and there is a distinct chance the likes of PLS and MinRes have also realised this. Their cut's may not be about closing unviable mines but about tightening up supply so that they start getting ~US$1,500/t more quickly. These C&M deposits will probably restart but if the reason for their closure is tight supply, the restart may be when prices are next US$3,000+.

Unfortunately, I don't know when this cycle will turn. Lithium sentiment will improve and will show there is not only a future, but a very good future for Australian spod.

Expand

Agreed WTT. The potential rise in lithium prices and overall sentiment could be similar to the % downside that we have experienced. Let’s not forget that Australia accounts for about 50% of today’s lithium production.

What we need to see here is the move away from a single commodity to mitigate from the circular lows. Hedge our bets. The example I gave on Friday is now up around 500% from its recent lows. Before their Niobium assays they were stuck at a similar share price of around 6-7c.

The board owe it to us shareholders to expedite this opportunity at the large Niobium anomaly. The potential reward is massive!! What do we have to lose especially with a MC of 5M?!

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Last 6.0¢		Change 0.010(20.0%)		Mkt cap ! $4.645M

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5.5¢	6.0¢	5.5¢	$39.81K	695.4K

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