General Discussion AGY, page-23470

G'day @Jezzaaa,

Unfortunately, I can't go for it—it's too risky for me. If AGY had managed to get the 2 ktpa plant operational before C&M, hitting over 50% production volume, and showing decent OPEX figures, I'd be interested at these prices. But they haven't, so there are too many uncertainties for me. Here are a few more concerns I have about this company:

1. As you've accurately mentioned before, this downturn is likely to last a couple of years. During this time, early-stage producers or those in commissioning phases aren't ideal investments (IMO). Commissioning and ramp-up stages are particularly vulnerable, making AGY, CXO, GLN, LTR, and SYA some of the riskiest plays right now. I'd rather invest in undervalued, large-scale, pure-play lithium producers with scaleability and good profit margins (e.g. LTM, PLS) or well-capitalised developers expected to come online later this decade (e.g. LRS, PMT, WR1, WC8). For high-risk speccy investments, I'd prefer nearology plays in safe jurisdictions that have shown positive results (e.g. LLI, RDN).

2. The unknowns with AGY make me uneasy. Even though these conditions were present when I first invested, over time, the hidden costs due to the JV structure have become more concerning to me. In good times, this might be overlooked, but in tough times, it's crucial to understand how over A$20m was spent in the past year and how much can actually be saved during C&M. Unforatunately JZ hasn't clarified how much money they expect to save during C&M, or how they actually plan to reduce costs.

3. There's no feasibility study. JZ aimed for an "updated" feasibility study by the end of 2023, and we still haven't seen it. While they've confirmed they can produce BG quality lithium carbonate, I'm not convinced of their economic viability. Whether it's extra processing due to impurities, the process flowsheet design, or something else, something is clearly off. The company has never disclosed OPEX estimates for the 2 ktpa plant, which is telling. Without clear CAPEX and OPEX for the 10 ktpa plant, investing here seems like gambling.

4. It might take 2-3 years for AGY to attract an acceptable strategic investment. In the meantime, they'll probably need to raise capital again, likely multiple times. Hence, I expect the share price to drop in the short to medium term, possibly down to the high 2's following the next cap raise or subsequent selling.

5. I don't see any positive news driving the share price up in the next few years. They still have ~80 tonnes of carbonate to sell, which might lead to a few shipment announcements, but the last one had no effect on the share price. JZ has been media-averse pretty much the whole time I held here, so his salesmanship isn't much help. With many other more attractive and well-covered lithium companies available at bargain prices, I can't see investors flocking to AGY.

6. I believe that within the next few years, JZ will wave the white flag and sell AGY's share to a Chinese player, potentially ATL or another company. In the current market and immediate future, I don't think AGY's share of Rincon will sell for more than $100-150m, limiting potential returns from here.

At this point I'm just keeping an eye on AGY out of interest. My kids still have small holdings, and if nothing else, it serves as a lesson to them that not all investments are winners, no matter how much patience and perserverance you have. While I'm not convinced AGY is headed for VA, I do think that's their current trajectory. For those still holding and willing to endure potentially lower prices for a few more years, there's hope it might turn around and provide some returns or at least recover the initial capital. It really could go either way though.

Good luck!