LTR (ASX) CHINA WILL BE VERY MUCH SHORT IN LITHIUM

Originally posted by anatol: ↑

I must say this first; we, as the Australian lithium investors, are fighting against the Chinese government.

We are not just plain investors whom struggling in the free market conditions. The Chinese gov. is subsidising its lithium mining industry; both lepidolite mining and brine extraction in China.

I can see clearly now that majority of the brine resources are already being operated by the central state (Chinese gov.) companies and continuing production without worrying about profit. Lepidolite producing mines are mostly in the private company hands but they also continue production even though its very clear that they are making loss. So it's clear that the Chinese gov. subsidises them as well.

I have just finished researching the Chinese brine resources today. Because their brine resources are the largest LCE contributor to the Chinese production capacity.

As you can see on myPost #:79286813above I gave some production numbers about these resources;
brine production in China (Estimated: 130kt-180 LCE)
lepidolite production China (Estimated: 100kt-150 LCE)

I can't be sure about the exact number because there is no data released by any of those lithium producers in China. I have done a detailed list of them but nothing is clear. Therefore I had to put min and max numbers.

When I was adding those numbers to the total world production I considered the max numbers; Brine: 180kt and Lepidolite 150kt.

I posted the lepidolite production costs before, and giving it again below. They are all making loss now. But they don't care about that.

When it comes to the Chinse brine resources; they have main resources at the Qinghai Salt Lake area at the altitude of around 3200mt.

Tibet salt lakes are actually better (in terms of higher lithium content and lesser magnesium in brine) than Qinghai lakes however the area is so remote and the altitude is so high (over 4000mt) and no infrastructure there. Also the raw lithium chloride extracted from brine has to be transported 2000km to the process plant.

All of those lithium carbonate extracted from those salt lakes have to have a very high cost. Actually the first company started operations in Qinghai area was bankrupted. The reason is the lithium content is very low and magnesium content is extremely high in the brine. They are so high that you can't even compare it with Argentinian salt lakes, and can never come close to the Atacama salt lake brines.

The magnesium/lithium ratio (which is the main factor for brine extraction) in these lakes are multiplies of 100s while it is less than 6 for Atacama and less than 3 for Argentinian lakes.

See below. The list of Qinghai lakes. The best lithium grade in one lake is 240 mg/L. This the worst grade in the Argentinian lakes. (They won't extract lithium from that brine it in Argentina). But the Magnesium is super high; 12,500 mg/L. No other by product credits like potash there.

The largest lake is Qarhan, and its lithium grade is 210 mg/L but Mg content is hyper high 66,500 mg/L. The company which was bankrupted was operating in this lake. Its Mg/Li ratio is of course very high; 320.

You can compare it with Atacama, Argantin and Bolivia (Uyuni) lakes below.
Atacama also has the potash content and it's good as a by product which can offset the cost of removing high Mg.

What I'm trying to say is, even the Atacama and Argentinian lake lithium brine producers are crying atm, how come the Chinese brine lake brine operators can make money? Not possible of course.

So it's clear that the Chinse government is subsidising all those operations.

You can see the evidence of that on the news link below;

"China sets up Beijing-backed lithium group to tap salt lakes"
Bloomberg News, Sept. 9, 2024.

"The sprawling mining-to-trading group backed by China’s central government will hold 53% of a new joint venture, China Salt Lake Group, which will in turn take over Qinghai Salt Lake Industry Co. .. The restructuring has been under discussion since at least April, and suggestsa move by the central government to push for a bigger role in building out a key part of the domestic lithium sector. Qinghai province, covering a vast sweep of northwestern China, hosts many of the country’s lithium-bearing salt lakes."

I think it's clear now that we are fighting against the Chinese gov.

CHINESE GOV. STARTED THIS POLICY IN 2023 AFTER THE BIG LITHIUM PRICE SPIKE.

Before 2023 the Chinse gov. was not subsidising the lithium producers. For example Tianqi went into a financial trouble in 2021 because of the loan it got when it bought SQM's 23.77% share for USD 4b in 2018. Chinese gov didn't help Tianqi and Tianqi had to sell its 25% share to IGO which it had 51% in Talison Lithium which owns Greenbushes mine. However Tianqi still controls 100% of mine because it has JV (TLEA) with IGO and holds the control in that JV. And IGO had to sell its spod share to Tianqi China at the spot price. Stupid..!

GREENBUSHES IS THE BEST WEAPON FOR CHINA TO KEEP THE GLOBAL LITHIUM PRICE LOW

As you said Greenbushes was alone having been 38% of global hard rock and 22% of the total global lithium market not long ago. Now it produces ~1.5mt spod which equals to 200kt LCE. And it makes 13.3% of global LCE demand of 1,500kt.

That's a huge number. If you could remove 200kt LCE from the market, then it would be in big deficit.

Ok now.., here is the catch;

TIANQI, THE CHINESE COMPANY IN AUSTRALIAN SOIL, IS USING AN AUSTRALIAN ASSET AGAINST OTHER AUSTRALIAN LITHIUM MINERS WITH ONLY 26% SHARE.

As you know Greenbushes mine never cuts the production. It even tries to increase it (but not much chance). Flooding the market with 1.4mt spod or 185kt LCE.

49% of that spod produced there belongs to Albemarle but it also sends that spod to its Chinese refinery or sells it on the spot market. Albemarle has no control over the mine production. The mine will have to produce as long as Tianqi wants to do so. And Tianqi does it.

Albemarle has only on chance. The mine will keep producing, Albemarle can't stop it but it doesn't have to sell its produced spod share. So Albemarle has to stock that spod in somewhere. So that is not being viable for Albemarle too, because it also need the cash flow. Also stocking would mean that Albemarle would have to pay the production cost without any cash flow.

We can see how the Greenbushes mine is being used by the Chinse now.

Also, the Australian gov. loses huge tax income from the spodumene exports as the export price is too low.

For example, Greenbushes operations sales revenue was $10.5b and EBITDA was $9.5b in FY2023. Can you imagine the amount of tax they paid for that year? Billions.. (I didn't check out what the each company exactly paid).

Now, for this year, I think they will pay nothing.

WHO BENEFITS FROM LOW LITHIUM PRICES?
OF COURSE THE CHINESE GOV.

It's not only the Greenbushes mine which will not pay any tax because of the low lithium prices, it's all the other Australian lithium producers too will not pay any tax.

I think Australian gov.'s loss from taxes and royalties might be around at least $1.5b per year. (Calculated for 3.6mt spod, at USD1500/t sales price, ave AISC US$600, and US$900/t profit, AU$5b net profit for all, and 30% tax. Rough calculation, don't shoot me)

In contrary, all Australian lithium producers are now even asking Australian gov's help. It's a weird, or even a stupid situation.

THE CHINESE COMPANIES AND GOV ARE EXPLOTING AUSTRALIAN LITHIUM RESOURCES.

AND WE ARE WATCHING THEM..!

Now what you said is right;
"One option, whether realistic or not, is the Government step in. Other Governments do/have stepped in to halt supply of exports when it has gone against their National interest.Clearly all repercussions of this option would need to be thoroughly investigated before any action could be taken".

I agree this too.

"Not simply a ‘critical minerals stockpile’, or a more transparent market, but a minimum price onfinite resources. This includes a minimum royalty payment to Government as well. Yes, these numbers need to be commercially realistic and take into account the bigger picture. Perhaps an OPEC style arrangement is worth looking into. Do South American producers also come into that equation? Everything should be considered."

Yes, I agree that a national critical minerals stockpile won't solve the problem. Also these resource are finite. There is a defined mine life for each of them; 12, 15, 20, 25 years, of course that depends on the mining capacity. But they will all be depleted and disappear. They are irreplaceable.

Expand

How can your Macquarie chart you used to "prove" lepidolite is loss making remain credible given it places Qinghai brine on the far left and you have gone into great detail to discredit the costs of Qinghai brine?

At what point would you acknowledge the use of DLE within China provided by the likes of SunResin? Will we have to wait until a "Western" company does the same? We could be waiting a while as China does not share it's tech.

Also given Lithium was a byproduct (not even a coproduct) from Qinghai brine Potash operations for a very long time, why do you claim the salt lakes there are no good for fertiliser production?

(20min delay)
Last 94.0¢		Change -0.020(2.08%)		Mkt cap ! $2.283B

Open	High	Low	Value	Volume
94.5¢	98.5¢	92.5¢	$16.86M	17.75M

No.	Vol.	Price($)
4	329463	0.940
1	1283	0.935
2	51076	0.930
8	163778	0.925
4	25923	0.920

Price($)	Vol.	No.
0.945	32094	3
0.950	40643	2
0.955	24065	3
0.960	200186	9
0.965	79800	5

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