100% WTTNaivity reigns supreme it seems ... and money matters...

100% WTT

Naivity reigns supreme it seems ... and money matters ... all legitimate banks (so exclude Chinese banks) have security of their capital as paramount ... as LTR found out. "Credit Risk" (the probability of a borrower failing to make principal and interest repayments on time and defaulting) and the covenants put in place by banks to minimize this risk were exposed for LTR due to the low commodity price, their costs and the margin available to LTR to run the business.

IMO GT1 hasn't done a whole lot "wrong" - their (I think differentiated) strategy from the beginning was to develop downstream lithium processing capacity (hydroxide from spodumene) and using renewable energy (hydro) to supply North American battery minerals markets - i.e. in Canada and USA. You can only do this IF you can show a MRE (Measured & Indicated categories are what counts) capable of supporting a refinery operating for 30yrs.

Lots of lithium (in spodumene) in Ontario as their is in Quebec and other parts of Canada and much of it is in difficult to access areas - but not GT1's project. But so what, spodumene is not an input material to a CAM plant ... a lithium salt is (Hydroxide or Carbonate). GT1's plan is building an integrated lithium business (often wonder why they don't partner up with phosphate miner for a integrated LFP CAM plant).

And lets not forget that Lithium Americas (LAC) is a ~5% strategic investor (paid $1.05 in Apr 2022) and together they have a "Non-binding Collaboration Framework established with LAC to assess a strategically located, integrated lithium chemicals business in North America". Sure LAC's Thacker Pass project dwarf's anything that GT1 could put together, but LAC is clearly looking the future landscape for North American battery minerals.

There will be a long term price average for lithium ... not as low as it is now and perhaps not as high as it was before (but its possible that that this collapse ensures that future price is higher than previous highs". As you said
"combination of rising demand and sharply falling prices is very unusual"
I absolutely concur ... basic ECON101 - supply and demand curves and equilibrium pricing and how that moves.

One "event" to watch is the sale (auction?) of Sigma Lithium (last 3 standing are Ganfeng, BYD & VW I read). How much are they prepared to pay for "Green Lithium"? The whisper (?) of US$3B for the whole company suggests minimum SC6 price of ~US$2,000/t as a modelled price.

I also thought some of the musings of Howard Klein and Rodney Hooper interesting in their last podcast "Peak Pessimism?"
Something we kinda knew but how quickly it occurred and impact was
"we accurately along with others, projected a shortfall on a structural deficit a couple of years ago and then lithium ran to $80/Kg and material came out the woodwork. What you saw is, as I said in my presentation, DSO - any sort of direct shipping ore - any low grade material that you can just basically dig up and put on a on a boat, is the canary in the coal mine, because that isn't a 5 to 10 year window. You can do that turnaround - like you've seen in Africa and elsewhere - you can do that very quickly. That's not 5 to 10 years - when all you're doing is getting a permit to dig up straight ore. So, I think the dynamics change when that material becomes economic."

That it certainly did ... and now its not economic ... especially if your shipping dirt halfway across the world.

"but what I do know is, if we go lower or get “Peak Pessimism” lower that you're talking about, and there's no capital investment by the majors, M&A starts to cool off, and we start to see Care & Maintenance, then you sow the seeds for the next run depending on how quickly companies can come out of Care & Maintenance."

Just like fire ... starve it of oxygen and it burns out quickly ... is that what we have here? Starve the capital required. Had a big impact on LTR. And which mines go on to C&M? That's a 2-way street. IF (and its a big IF) the OTA has an out-clause (and how long a notice period) then terminating it has long term (negative) impact on the business. You as a supplier become "unreliable" - just like if your buyer wants out just because the price of SC is to high and would rather idle their refinery (may not sound logical ... ) ... especially if demand is supposed rising (but mineral price is falling).

This was most interesting... HK poses the question
"Andy Leland of “SC Insights” made a comment - well popular X post - but one of the components of that was. he was arguing “you don't want to be in the producers, you don't want to be in the early-stage explorers, you want to be in advanced stage developers that might get bought out”. That's like right in the middle of the Lassonde curve when equities tend to not perform. Do you agree with that?"

Are we are "advanced stage developer"? Not quite, but we certainly aren't a producer and we certainly aren't an early stage developer (i.e. without an MRE or with an MRE but mostly Inferred).

RH gave a lengthy answer, I've clipped it to
"I wouldn't want to invest in a late-stage developer that still needs money, because that's going to be hard to come by - as we know ... but for my money, if you believe that on balance through the ebbs and flows, we are going to continue to have a structural deficit because ... solar plus battery storage is going to be huge ... with some huge numbers that are underestimated ... but I do think if someone's got some good land and most of the market cap is in cash and they're about to drill, then there's opportunities and if flow through financing continues in Canada and in particular in Quebec, then you're getting a lot of bang for your buck raised to drill ...

well yes ... again have a look to LTR for what that means and then the "flow through financing" ... something that GT1 has used to its advantage to get "a lot of bang for your buck raised to drill"

and then this bit specific to Winsome Resources but a "look thru" to GT1 is obvious

"you've got an $80M - at the moment - $80M Enterprise Value in Aussie dollars for 60Mt of resource and that's it's basically, it's less than a $1M a ton. I think it was Euroz-Hartley saying you should get $10M and I thought that was a bit rich but 1/10th of that - that's quite something regardless of whether it's JORC or NI-43-101 or however you want to define that resource. They’ve got a lot of assays still coming in that have already been done and paid for that are likely to take it to 70Mt"

Not sure of those numbers RH ... the data source I'm looking at for Winsome has a MC of US$86M less cash US$28M for EV=US$58M. The net net though (as you noted WTT) is on that basis ... 1Mt of Resource is worth US$1M of EV ... not sustainable (cost more than US$1M/t to get that MRE done ... certainly beyond Inferred)

For GT1 ... total MRE = 24.9Mt (includes Inferred) or 15.5Mt (M&I) or ~62% with grade of ~1.3%
I have EV of US$33M for GT1 .... so that means 1Mt of M&I MRE is worth $2M EV .... seems low

So compare with WR1 (with MRE 59Mt at 1.12% but 100% Inferred) ... where its basically $1M or EV for every 1Mt of Inferred MRE

All I'll do is add $9.4M to GT1 EV and get US$42.5M which simply means what ... trading at a discount to peer group (of 1 in this case)

It's called risk capital for a reason. I see many similarities to O&G "shale revolution" of a decade ago - rock matters, ZIRP made capital "too easy" to get (and risk it to put a hole in the ground), and valuation metrics on unsustainable leverage led many companies to failure.

Don't think GT1 is headed for the dumpster ... I may be right, I may be wrong, I may be crazy.