Just finished night shift on the salt mines so just burning some midnight oil with AGY on the brain. Going over some past announcements ranging back to the original OT agreements with Qingdao last August, I had a few thoughts with regards to our imminent/close/to be finalised/near-term preliminary offtake arrangement and related upcoming news.
Firstly, with regards to today's terrific announcement, it states that construction of the commercial plant will commence immediately pending funding or at least consideration of greater capacity based on other scenarios outlined in the PEA. You will note that the original plan (per D&D presentation) was that the Stage 2 plant would commence late-2018 (without any reference to any contingency on further funding). This being said I would expect that preliminary construction for the commercial plant has or will be commenced even with the absence of further funding (in place of the commencement of original Stage 2 plant construction), with any additional funding being the determinant of scale/pace of construction. I could be wrong. Noteworthy that our completed ponds can now support lithium brine and provides the foundation for a plant capacity of 1500-2000tpa
With the above stated, the upcoming OT agreement is an interesting one as I personally feel if we were just after the 500T standard deal, we would have done it by now. I firmly believe we are in the process of discussing further terms and the customisation of product is partially aimed at bringing more parties to the table. In classic JZ fashion I think a prelim 500T deal is the tip of the iceberg for what we can potentially expect. Under promise (in some cases), over deliver. In the D&D presentation, in the company overview section, the company stated its aim to have "continued engagement with customers in tightening lithium market to secure long-term offtake agreements and potentially strategic investment". I didn't read too much into the pluralisation of "agreement" at the time as it is a no-brainer that AGY want to eventually lock in a long-term OT agreement for commercial production. However, you will note in the PEA investor presentation released the other week, that the plan as of 2019 onwards is to finalise off-take agreement(s). I could be reading into this a bit (it is almost 2am right now so spare me if I'm going a bit coo coo), but I don't see why JZ would have needed to pluralise offtake agreements, especially following "finalise". In any case, I took a look at the agreed (at the time) OT agreement we signed with Qingdao last August to refresh myself, and remembered we had agreed both Stage 1 and Stage 2 OT deals (before any BG was produced or Stage 1 plant was operational).
IMO, with the escalated strategy towards Stage 3, a proven scalable process, a customised product (or close to it), there is as good chance the OT scope has increased. Yes current plant capacity is only 500tpa, but if Stage 3 plant construction has either commenced or will very soon, greater near-term (1-2 years) volume is very possible. Will it be a super-charged prelim OT? A Stage 1 + 3 OT? A hybrid? or basic Stage 1 OT with MOU for Stage 3? Coupled with that, we have the funding side of things. If JZ as he has indicated, has been in contact with preferred OT partners over the past year, my guess is he is keen to have the same party locked in to all OT and funding agreements.
IMO, we hold all the cards. We have the product, the chemical process and the right people. JZ I feel has his requirements for a deal, and it's now up to the relevant parties to agree to our terms. We have no reason to budge.
I could be completely wrong with all of the above, but one thing is certain and that is that AGY will be a success story, and we are on the home stretch to commercial production. If we only get a standard prelim Stage 1 OT, I will still be happy as it is progress!
GLTA, AIMO...etc etc
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