GXY Project Execution Strategy
The Project Execution Strategy below is taken from page 15 of the Corporate Strategy and Projects Update announcement released on 18/11/2019:
GXY Pond Size
The existing “demonstration ponds”at SdV cover an area of 15 ha (approx. 300m x 500m).
I wonder why 15 ha of ponds are neededif this is just demonstration? Why couldn’t they have just built one pond? But anyway, 15 ha is insignificant when we look at what is proposed in Stage 1 and Stage 2.
The project execution strategy forStage 1 (see above) is for an estimated 320 Ha (3.2 square kms) of ponds. That’s21 times the size of the current “demonstration” ponds. And that’s just for Stage 1.
Stage 2 is for a straight copy ofStage 1 (so another 320 ha of ponds).
Stage 1 and 2 together providefor 640 ha of ponds. Just think for a moment about how big that is. We are talking about an area of 6.4 square kms. That’s an area of ponds extending 3.2 kms long x 2 kms wide.
This begs a question. How do they plan to fit these ponds into the available area given the “demonstration ponds” at SDV have been strategically located to avoid flooding and take up most of the available location. Could the 640 ha of ponds be built instead on the POSCOs tenements? They look to have sufficient plateaued land for pond positioning. POSCO are not building huge ponds, which makes you think they are looking at direct extraction.
In comparison Livent which haveperhaps 40 - 50 ha of ponds, which is based on the traditional evaporationmethods. So why does GXY require 640 ha of ponds? It’s actually laughable when you think about the pond size GXY is suggesting.
The case for direct extraction
It isquite interesting that the Project Execution Strategy does not refer to thedemonstration stage, particularly given its importance to the project execution(i.e. the FID depends on the success of the demonstration ponds).
Could itbe then that GXY’s demonstration ponds are in fact Stage 1? Is there achance then that the demonstration ponds are the real deal and we are deep intostage 1 already?
If GXY ispositioning itself to utilise tested direct extraction technology, then it couldin theory be producing 25kt pa of primary grade carbonate by the end of thisyear. The modular build taking place off site and transported like Meccarno toSDV. After all if its good enough to hide pricing, its good enough to hide testtech results….
Perhapsthat’s why Simon said 2020 was going to be a great year for galaxy.
I wonderif GXY ended up taking this path if it could be said that the market had beenmisled. It would appear the company has done just enough to avoid this scenario. There is a disclaimer the Project Execution Strategy that could let the company off the hook. Buried in the footnote in fine print is this - “Capacityis the subject of ongoing collaboration with equipment OMEs andfurther engineering”. Could that further engineering mean (surprise surprise) direct extraction?
Lake Resources (LKE) have said they are using direct extraction via ion exchange:
Youtube.com/watch?v=nsDHe-k433k&feature=youtu.be
At theend of the day, who can wait 12 - 18 months for evaporation ponds to spit outlithium? Supply will not meet demand for battery grade chemical from EV penetration.
Also, itshould be noted that in the March Quarterly Report released last week, thecompany says the pilot plant commissioned in Q1 2020 will see first productionof primary lithium carbonate thereafter. This begs the question - if it takes 12 - 18 months for ponds toevaporate, then how is it GXY will be producing and making a FID during H2 2020.
Don’t forget the Options
There are13,300,000 options with a strike price of $2.78 which will expire on 14 June2020.
These arecurrently way out of the money.
As itcurrently stands they have achieve the ability to exercise 85% of the options. Withthe remaining 15% being the FID on either JB or SDV.
It isonly 22 days until the AGM (21 May).
