My comment on A40 forum after the trading halt, I mention also Galaxy :
"Discussion with lenders" given as a reason for trade halt/suspension for A40 from official quotation.
This is ugly and rarely went well for any company. With 42 Million$ of debt that needs to be serviced each month and unsustainable cash burn (higher costs of production than revenue) Good luck to all, IMO best case scenario for shareholders should be either a take over of the company or selling the project at a cheap price (to pay debt) or care and maintenance of the mine while the company survives (but who will service debt in that case).
Logically there would be some casualties due to low commodity (here spodumene) prices when we are at the bottom of a commodity cycle, the first miners to go under the bus are usually the lowest grade / highest marginal cost / high debt producers. I always suspected this would happen by end of 2019 to A40 (due to lower grade 0.90% and therefore high marginal costs) and then probably Altura (good enough 1.1% grades but due to unsustainable high amount of debt 178 Million$). Probably PLS may survive due to the relatively higher grade 1.2% / huge size of the mine. GXY IMO will survive the storm due to their stockpiles of cash and average 1.1% grades.The lithium prices could recover by H1 / or H2 2021 or end of 2020 at the earliest (anyones guess) thanks to the commercialization of first affordable EVs from Volkswagen and other european and japanese companies.
It is paradoxical, but closures of mines / stopping mine expansions is exactly what is needed for (and ultimately causes) in the short term / medium term a commodity price recovery. In the long term though, only higher demand will improve pricing.
GXY Price at posting:
$1.23 Sentiment: None Disclosure: Not Held
