Good News & Bad News, page-291

Good Morning @rainbowdaisy,

I think the main issue in your last two posts, which you have acknowledged is that you're using data that is practically 2 years old to make a statement that Pilbara is selling their 6% spodumene at pricing less than MRL by 13% to 20% however the recent information that is applicable now from both companies indicates the opposite, in that Pilbara is the one selling at 20% higher.

MRL appear to be only showing pricing they are receiving on a combination of both 4% & 6% spodumene which makes the comparison between each company's selling pricing a grey area, though this doesn't mean that they are making any more or less in what they receive for the 6% product they are selling.

What this means is that we cannot say with conviction that either company is receiving better pricing than the other for that specific product grade though what we can say is that by Mineral Resources being entitled to 50% of the production from Mt Marion and in FY2020 that was 407kt then their entitlement would be 203.5kt and at the pricing they quote as being received during that cycle they would have received revenues of $93.4 million vs the $84.5 million that Pilbara received for that same period.

MRL 203.5kt vs PLS 116kt would indicate that for the additional 43% effort MRL they only received an additional 10.5% of revenue. Do you think that additional return was worth all that extra effort?

In my perspective it might indicate an inefficient operation by comparison to Pilbara, though, before I receive a nicely worded email from Chris Ellison on my assumption can I also point out that from what I understand Mineral Resources provide the mining services, in which case perhaps they are making money from Ganfeng there which substantiates a valid reason for all that extra effort and in which case maybe Mineral Resources are making more money on each tonne of spodumene mined, it's just not being allocated in the price received. - Make sense?

With regard to the tantalum credit, we can see Pilbara use this to reduce their cost of production. It does make sense to silo that revenue rather than divide it amongst the tonnes sold as it would provide a clear picture as to what the costs of mining are per tonne of spodumene. However, it is what it is and I think by way of the tantalum being considered a by-product and Pilbara considering it nothing more than a nice to have credit that is why they apply that credit to the cost of production.

On the discussion of Tantalum credits, from the research that I have done over time I have never really given it credit. (pun intended) It is a nice to have when we consider in Pilbara's case that it easily covers the cost of management. Though if we consider that the tantalum credit for FY2020 of ~$7.5 million almost equates to the additional $8.9 million MinRes made by their additional 43% effort, that's a damn good deal for something Pilbara is coming across in the process of producing their core product spodumene.


Also, on your previous post you were wondering where the SC5 was coming from. Perhaps that might be from Galaxy as they were shipping ~5.85% last year whilst mining ~6% by throwing in a bit of lower grade material in the mix.