Just done some interesting research on what other peers margins are, how low lithium prices are affecting them, and the sustainability of it.
Here's some facts based on the latest quarterlies:
Arcadium (Livent + Alkem Combined) (Brine and Hard Rock)
Quarterly revenue of $181.8m
Operation expenses + selling & general admin $154.5m
= 27.3m profit (15% margin)
hard rock is less profitable than brine (as brine converts their own lithium to LCE) so they have wound down some production at their hard rock, but continuing expansion of their brine plans).
15% margin isn't much.... if you look at the average spot price during Oct-Dec 2023 it was around $17.3k USD, and its now $~ 13.3k USD. Which is around 23% less. the price of spod has also dropped a lot. They say in their report that a lot of their prices are month-to-month based. and while some are long-term pricing based with price floors, a lot of it is current market price based.
I wouldn't be surprised if next quarter -- based on current lithium price they would be at a small loss or near breakeven.
(FYI for those of you who are interested, 30-40% of their carbonate is battery grade)
lets move to the next
Pilbara (PLS) (Hard rock)
In the latest quarter PLS sold their Lithium Spod (5.2% concentrate) for:
$1,113 revenue
$805 operation cost
+ add selling, general & administrative expenses and you've probably got a real tiny margin there
but spod price has since gone down even more... since Oct-Dec 2023.
6% concentrate spod spot price is now $910 (0.8% higher grade than what PLS sells)
Safe to say at these price PLS would be running at a loss if lithium price stayed where it is.
Sayona (SYA) (Hard Rock)
I've been interested in them because they've always got a lot of hotcopper post counts, so clearly quite popular.
they produced 34,237 tonnes of 5.5% spod last quarter, compared to:
Pilbara: 175,969 tonnes
Alkem: 69,789 tonnes.
being a bit of a more recent producer they're quite high on the cost curve for now.
They received $946 revenue per tonne
cost of $1,397 per tonne (+ other costs).
they're also hemorrhaging money quite quickly too with:
$232m at start of quarter
$157m end of quarter.
Galena (GLN) (Brine)
They're not in production yet, and are currently building their phase 1 plant of 5.2k LCE per annum.
They're also hemorrhaging cash quite quickly doing a similar tactic to AGY and building their phase 1 plant before they have financing (only GLN have run out of money and need financing to finish it)
$31.2m cash start of quarter
$15.8m end of quarter.
+ conducted an equity raise for $19.5m to add to the $15.8m
(will need another raise in the next 1-2 quarters without financing, which their current predominant finance option is debt. At these prices the debt option just isn't feasible)
Conclusion
Lithium price is not sustainable at these levels and has to increase.
Value for money is purchasing around these levels as it's due to increase in the future
however depending on the company you have risks of money running out in the circumstances of AGY, GLN, SYA if the current cash burn rate keeps up.
Even better value for money is investing where a cap raise is required and taking advantage of the low price.
Will AGY need one? Jerko says no, and based on his timeline we wont.
my conclusion to the conclusion (wink face): now appears good value in terms of buying... but just... be careful...
1. you don't know how long prices could stay supressed
2. while Jerko says we wont need a CR, murphys law is a thing and be prepared for if that happens.
After researching a lot of peers this week, honestly i actually do quite like AGY, they're still my favourite.
- we have no debt,
- we're a brine player so our profitability is better than hard rock,
- our 2,000 tpa plant is already built
- Jerko is very frugal with cash and is tighter than a fish's Arse hole (which is what you want in an environment like this)
- the investment option he spoke of was prepayment of lithium product as opposed to debt (wh0 knows if thats still on the table though)
- permits coming soon for additional 10,000 plant
- learnings from the fully funded 2,000 plant should mean quick commissioning for the modular 10,000 plant
downside: even though plant 1 is funded, we're relying on financing to keep it going for now as cash it getting low.
Sorry for all the information overload guys, but im sure it'll help!
Big Jezzaaaa over and out. (not financial advice)
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