In general, I don't disagree with what you said. I agree the initial forecast DFS was too optimistic on recovery and costings. But it was also too conservative on pricing.
As to recovery, we are really not that far off from industry leaders like PLS which uses a Flotation system. And even with a Flotation system, they still can't achieve their DFS recovery rate. Moreover, their costs are above their original DFS estimates. That is the fact of life.
Another unusual factor, is the industry have been impacted high inflationary forces in the last few years - on labour, fuel and supplies. These things could not have been foreseen when the estimates were prepared, IMHO.
Of course, this does not mean we shouldn't focus on cost cutting. We should. We have to.
Nonetheless, in all mining start-up, the cost is generally higher in the initial years - especially when you are extracting weathered rocks, near the top. But as you go deeper, you hit the sweet spot, and your recovery and costs in general goes down.
IMHO, the most important factor, right now, is the price of Li. In the last month and half, it has dropped by more than 50%. Its now sitting at USD $960 (CIF) at 6% LiO2.
Take for example Industry leader PLS, which is selling at 5.2% Li grades (not the 6% grades), so discount it by 10%, and then discount another 10% by selling to offtake partners which comes out at USD $768 (960-960*0.2).
Now, last quarter, PLS's unit operating cost (CIF) was USD $658.
Any way, if you plug the above figures, you will get a gross profit of USD $110 p/t (768-658). Multiply that 146 kt for the quarter, which equates to USD $16M in gross profit per quarter - equaling to USD $64M for the whole year (assuming the same price for next 12 months)
Then you deduct other costs such as depreciation, rental, amortization of deferred stripping, exploration expenses, share based payments, Interest expenses, leases, wages/salaries, payroll and super of head office staff. In 2023 year, that came to AUD $106M or USD $69M. Assuming for 2024, the other costs will be similar to 2023, which is at USD $69M.
At best, you are looking at a breakeven year for PLS. At worst, a Loss (USD $64-USD $69).
So in this price environment, few, if any would be profitable.
Finally, I like to point out that regardless of industry, a 50% price swing within a month, will put them any in a loss situation.
Its just Not sustainable.
I just can't work out how the Chinese Lepidolite producers could survive in this price environment. If anyone know what their costings are, please share.
(20min delay)