@TrufflehunterRegarding the broader lithium market, my views largely align with respected analysts (BMI, Fastmarkets, etc) who believe that lithium prices will remain subdued for the next few years. This doesn’t mean there aren’t good investment opportunities, but it does mean that investors need to be more selective. The days of 2016/2017 and 2021/22, where any ASX lithium play could easily yield substantial returns, are over. Some long-term AGY investors mistook their luck for genius, but unfortunately that wasn't the case.
Nonetheless, major players like LTM and PLS are still solid long-term investments (IMO), and certain key explorers and developers could perform well even in a depressed market due to factors like M&A, diversification of assets, access to existing infrastructure, low CAPEX, large/high grade resources, advantageous ore-bodies (shallow/low-strip), access to funding, subsidies, and geographical advantages. Unfortunately, AGY is not in this group.
Regarding the recent news, I believe it's catastrophic and most likely existential for AGY. Contrary to some opinions here, care and maintenance isn't as simple as switching the plant back on whenever you feel like it. The process is costly and complicated, especially given the environmental exposure risks at the Rincon plant, located on a salt lake. My guess is that AGY/Puna has about $12 million in available funds, but care and maintenance alone could cost several million per year.
To illustrate, the Renard Diamond Mine in Canada currently costs A$2.2 million per quarter for care and maintenance, or just shy of A$9m per year. While costs in Argentina would be significantly lower, I still expect AGY to incur significant annual costs moving forward, including:
~A$4 million for the care and maintenance of Rincon Stage 2 (including remaining Puna staff salaries)
~A$1.5 million for AGY staff and admin costs
~A$0.5 million for engagement with the international investment bank for a future JV
~A$2 million for engagement with the engineering services company for Stage 3 pre-development engineering works.
~$8m totalThese assumptions suggest AGY will need to raise more funds within 12-18 months to avoid voluntary administration, likely resulting in massive dilution and greater-discounted raises. This cycle could repeat over the next few years, with raises at ever-lower prices.
At this point, I honestly don't see a viable path forward for AGY. I expect they will offload their share of the project with the next couple of years, as no one will provide the >A$380 million CAPEX for Stage 3 after their failure to commission two previous plants.
A few other points to consider:
1. The EIA for Stage 3 is valid for only two years, with conditions and requirements that AGY must meet to maintain its validity. There are likely ongoing costs associated with this.
2. With a shelf-life of 1-3 years, the remaining product in the shed needs to be sold before it becomes worthless. After it's sold, without a working plant, providing samples to future potential customers will be impossible without a costly restart.
3. ATL is unlikely to hold onto their investment, as the company is now going nowhere. So there's another 51m shares to be dumped into the market at some stage, and ATL are unlikely to care about the price they receive after already setting fire to 65% of their capital.
In summary: lithium isn't dead, but I think AGY is. All IMHO.
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