Why is LTR not making any strategic off-take agreement?
Is keeping the resource uncommitted and unencumbered a strategic mistake or a requirement by a prospective buyer?
Is Liontown doing all its activity under a strong (undisclosed) commitment to one prospective buyer only?
The reasons behind my questions are coming from these facts;
There is no other Tier-1 hard rock resource under development other than LTR's KV Project.
Half of Earl Grey deposit is not enough for Wesfarmers. Their partner SQM in Earl grey project is also controlled by Tianqi which owns 24% of SQM.
Wesfarmers must buy another resource if they want to be strong in lithium business as they have a very strong experience in refinery industry and a presence in Perth.
Wesfarmers is much bigger than Albemarle and Tianqi (each has US9.5b market cap while WES has over $US35b). Both of those companies have financial problems atm.
A large company like Wesfarmers has to have a larger presence in the lithium chemical industry, needs even more when it happens in its own home, in Perth where the largest integrated plants are being built and operated.
GREENSBUSHES FACTOR IS ABOUT DIE IN 10-15 YEARS;
Lithium prices are low however Greenbushes is now making another production optimisation to increase the output (very similar to expansion, making upgrades in the plant to increase the capacity). That tells us they sell everything they produce, and they need more. The largest mine of the world Greenbushes life is very short. They will run out of high grade ore around 2030-2032 when lithium demand is very high.
Graphic amended from LTR's latest presentation.
There will be no lithium supply deficit in next 3 years however after then there will be a big deficit. That’s a very clear fact and the lithium suppliers and demanders should make their moves NOW!
Majority of offtake agreements for lithium hydroxide and other battery metals are made for ave. 3 years. No one knows what's going to happen after 3 years. 3 Year is a barrier in battery supply chain.
We all know Tesla (Elon Musk) has ambitious plans. Tesla can’t secure its future battery cell supply for battery module production through its offtake agreements with LG Chem, CATL and Panasonic due to its ambitious plans in increasing the vehicle production.
Tesla (Elon Musk) knew that long time ago and said they might go into lining business. That was not a joke.
For Tesla as a company to make money, it needs to make sure it’s not spending too much, and one way of doing this is scaling up battery production and managing parts of the supply chain that need its leadership.
Therefore, Tesla must go into the mining business as Elon Musk said. That was not a joke. Mining business means upstream area of lithium supply chain; concentrate production from mine and lithium hydroxide production by chemical refinery processing.
Tesla should do that with an independent but experienced producer like Wesfarmers as a JV partner, otherwise Tesla can't go into mining business alone.
Tesla could buy Albemarle which is another US company with both hard rock and brine resources, however Tesla would have to pay around $15b for buying Albemarle. That’s a big amount for Tesla now. Paying $1b to WES-Tesla JV would be much better. No need for a brine resource either.
Tesla already has a binding offtake agreement for lithium hydroxide with Wesfarmers (inherited from Kidman). Tesla is expected to buy about 5000 tonnes a year of lithium hydroxide from Wesfarmers, and has two three-year extension options. That represented less than 25 per cent portion of initial nameplate production (half of 44,000 tonnes a year with SQM) for the first three years of operation of a refinery in Kwinana.
Tesla’s only other agreement for lithium hydroxide is with Ganfeng. The three-year contract, valid from January 2018 to December 2020, can be extended by another three years, Ganfeng Lithium.
Tesla has no other lithium hydroxide offtake agreement with any other producer.
These two agreements won’t meet Tesla’s future lithium hydroxide needs after 2023.
If Tesla and Wesfarmers would buy LTR jointly there would be no lithium supply problem for Tesla for the next 25-30 years.
Wesfarmers would be a happy miner and refiner s they sales would be completely secured in the long term.
IS IT TESLA KEEPING LTR AS UNCOMMITTED AND UNENCUMBERED THROUGH WESFARMERS?
We know that Tesla wouldn’t want any other offtake agreement involved to a resource which they want to buy.
We know that Tesla wouldn’t want any other offtake agreement involved to a resource which they want to buy. Here is my question again;
Why is LTR not making any strategic off-take agreement?
Is keeping the resource uncommitted and unencumbered a strategic mistake or a requirement by a prospective buyer?
Is Liontown doing all its activity under a strong (undisclosed) commitment to one prospective buyer only?
COULD THERE BE AN UNDISCLOSED PARTNERSHIP BETWEEN WESFARMERS AND TESLA?
I always said that the cost of mine concentrate plant ($1b cost) plus chemical plant ($1b cost) is around $2b. WES-Tesla JV can easily fund that amount.
Is Wesfarmers’s sale of Coles stake for $1.1b a coincident?
Btw, Tesla has done a US$2b CR recently. I always said “the value of KV deposit is not less than $1b”
