Here is a crack at my own Galaxy weather forecast.
Feb 20 Tesla kicks off Model 3 test production.
Elon is promising 500k vehicles for 2018, a 500% increase in production.
Tesla stock has been on a steady rise lately in anticipation.
Feb 22 they release their quarterly which is expected to kick off another run.
http://www.reuters.com/article/us-tesla-model-idUSKBN15N2W7
This is Tesla’s tilt at the mainstream with a $35k USD vehicle (prior to subsidies).
Galaxy sp has tended to benefit from having positive announcements that align with Tesla news.
Makes sense. Each time they hit the front page another set of investors take a look at the Oz lithium scene to find who the real movers and shakers are.
April's Model S announcement coincided with mine opening.
The gigafactory production commencement in December coincided with GXY's first shipment.
This time it is shipment #2 in the last week of Feb. Throughput rate at Mt Cattlin has accelerated to nameplate and now we have Q1 SDV (construction) and JB (drilling) developments that may start drawing a lot of attention.
15kt shipping a month is what I’m estimating from March onwards based on current throughput. It should continue to climb as recovery rate improves.
The recently published list of investments in new lithium projects, including those of the majors, show there is little in the way of other production that is likely to be coming online over the next 2 years. Not uch to compete for the attentions of our current clients in the independent spodumene converter sector. Chris Reed, JL, AT and Deutsche Bank have made their predictions about when new entrants to hard rock can reasonably be expected to commence shipping.
It's very different to the prospectus plans out there.
Mt Marion was 18 months from build to shipment and began planning for it in 2012.
I'm going to leave that subject alone now because it annoys the neighbours so badly.
We will see who is right. The ones who have done it before, or the optimistic plans of the next wave.
New, previously unfactored demand is announced on an almost weekly basis.
We can thank
@Gameplanon for keeping us posted on all the news. Cheers mate. Excellent work there.
We need a new thread for lithium news so we can keep it all together for others to find.
VW’s plans are well known. They have committed to a large plan of public awareness of EVs in the States as part of the diesel-gate punishment, and to setting up new factories there to build EVs for the North American market.
Volvo has their first 100% EV for release in 2019. Germany is looking to ban ICE vehicles by 2030.
What will that mean?
Will German/euro auto companies abandon ICE vehicles sometime in the 2020s? It is reasonably likely, you would have to say.
With VW the biggest automaker in the world they can use production volume to drive down price, roll out infrastructure and normalise EVs.
Boutique makers - like Faraday Futures and other new entrants are steadily releasing high end EVs adding more options for the well-heeled to compete with Tesla. GM’s Bolt and Nissan’s Leaf continue to do well in the middle end. However, it’s likely that the Chinese will be the ones to drive wider scale adoption in the West with much cheaper EVs, probably led by Buffet’s BYD. Some say that they’ll be first targeting other markets first, as they iron out the safety and quality issues. ( India, Mexico, South East Asia etc). Certainly they will be getting the price down massively in a very short period of time.
By the time the Chinese $10kAUD per vehicle subsidies run out and they have 5m EVs on the road in China, they will have the manufacturing ramped up, helped by all the economies of scale and vertically integrated supply and the inherently cheaper drive train product.
(in hindsight the oz vehicle industry really missed a trick here. Instead of committing hari-kari, investment in local lithium industry, battery tech and processing could have made us a low cost global leader...
...)
Galaxy has made it’s own big move to immediately step out on it’s own with SDV.
It draws attention to itself already as the mini-major where the company's future gains are still exponential over a much shorter period. We can’t be sure if this first step towards SDV is to maintain 100% ownership or setting the bar much higher for future finance/offtake partners.
I’m inclined to believe it’s a bit of both. By already having an owner’s team, early stage finance in hand and a construction plan they are clearly showing that they have the experience on board to run the show. They don't need to bring in another major to run or build the plant for them. Those plans are already in place after 2 x DFS. All that is needed now is more capital, and that doesn't necessarily need to come in a hurry. $30m was the price tag for the preliminary test plant, which included the commencement of what will end up being 9 hectares of ponds for the full scale operation, and a scaled down version of the test plant. Mt Cattlin could tip in another $100m to cover capex during the year.
The important thing is not to repeat some of another oz company’ mistakes. They are already setting about training workers, have the management in place to review every step to make as sure as possible that the plant is well-designed and does it’s job. These are the steps that ORE missed by rushing in.
So much emphasis on charts lately.
As if they have a life of their own - which they do to a certain extent - but there are always important fundamentals in play, some within the company and some within the broader global economy.
Shortman published an interesting new Seasonal comparison page.
http://www.shortman.com.au/seasonality?q=GXY
This is one of the charts they put up.
View attachment 459275
To me - the chart looks very similar to what happened same time last year. Jan 2016’s peak dropped in Feb on China fears in a similar way to this one dropped on Trump's early presidency created fears when he took his eye off the economy and caused confusion about immigration. Now, with Trump promising corporate tax cut details to be released soon, the Dow Jones has again taken off to a new high. Chinese trade figures have also turned in an enormous bump in both exports and imports, highlighting a strengthening domestic economy. And that domestic economy is putting a lot of money into lithium and EVs.
Though Trump has handled some early policies with a bit of awkwardness, the stock market seems to be willing to forgive him and have lifted off again to a new high in what might mark the beginning of Trump Rally 2. All that is good for confidence on the ASX and bringing capital into the market.
If you take a look at the last 2 year’s graph overlay we could easily replicate the similar trajectory this year in Q2. We’re rapidly approaching Contract 2 and may get a further bump from drill results from James Bay and construction progress coming in from SDV.
Neither of these assets has yet to be recognised in our share price and they could easily play a part in achieving a new high in that quarter, moving onto the new target prices of B&H and Canaccord.
Whether AT is seeking a partnership or not, big players must be sniffing around. An offtake deal for SDV could see the same kind of immediate 30% uplift that LAC experienced when they inked their last deals with Ganfeng/Bangchak.
De-risking SDV is the big step for this year.
That and starting to get a sense of James Bay's quality how it may also be advanced.
It’s a highly ambitious plan to get both done simultaneously. And to add a processor at JB.
But this boom belongs to the quick and the dead. Once share-holders get a look at concrete plans to make this happen the stock price could be hard to contain.
Mac Bank's latest report (if you can a few paragraphs of opinion a report) have it wrong.
If $6.75kUSD/t lithium pricing is going to feature in the future, it will not be for at least 4-5 years and the survivors of that period will be the ones with brine supplies. They are definitely on their own with this price prediction. They seem to have done a vague head count of mining assets and then ignored the number of newly announced vehicle plans, grid installs etc etc.
Their guesstimate of future price doesn’t mention what year they think this will take place and is too low to support the growth of hard rock mines (and the enthusiasm of investors in them), perhaps capping the future spodumene price at around $500USD/t.
These prices were around the $450USD/t that ended hard-rock dreams a few years ago when Lithium Boom Mk 1 went belly up. I haven’t looked into whether they have issued other price targets for other lithium companies. If they have upgraded any target prices for hard rock mines it sort of shows that they aren’t capable of making any sense. Not to rise their target price by substantially more for Galaxy is plain manipulation when broker reports indicate their traders have been buying well above these levels.
Their question as to whether there was enough demand for SDV to be built should have been reversed.
Is there a question mark over the future of hard-rock only companies? Yes.
There is. Long term.
Only Greenbushes survived that first down turn and only by scaling back production, and already being a mature operation that wasn't carrying debt. Now, several years on, it appears that Greenbushes may be headed into a period where opex is rising. ALB were unwilling to tip more cash into an upgrade there (for several other reasons including constraints over their ability to profit from this supply with their Tianqi deal restricting sales in China).
The Big 4 have already answered that question (hard rock vs brine) with their investments in brine over the last period. I believe both supply sources will do well for many years, but the clear advantage will be with the companies that have both.
There is a lot of utter garbage written about brine.
(btw: Guess which instant lithium expert started most of it?)
Truth is that it’s a simply process to produce either carbonate or hydroxide from a brine plant. The first product, post dehydration and concentration, is lithium chloride, from which either carbonate or hydroxide are created, depending on what chemicals are added.
Galaxy could produce exclusively hydroxide from the plant if they wished. We always price the profitability of the plant with carbonate prices. Hydroxide would increase it’s value by 25% (at least until hydroxide production ramps up further).
SDV is Galaxy’s long term insurance policy. Once it’s in place then Galaxy is in for the long haul and reasonably protected against possible down-turn in pricing.
There are 2 possible demand-supply scenarios.
- Demand continues to accelerate for EVs and battery storage - and only a small fraction of the lithium hopefuls end up having the experience, finance and pure luck to bring their asset into production, keeping prices high. (most likely scenario for as far as we can see at the moment). On a more aggressive take on demand, the announced projects, even if the majority come online are still not large enough to cope with a faster-than-expected rise in EVs and grid installations.
- Supply eventually catches up in the early 20s. Most of this will not be hard rock, but because of new brine suppliers like SDV will have entered the market with their cheaper opex. Hard rock mines (as Chris Reed stated) may be competing for limited amount of processor clients, and unless they’re already equipped with processors (i.e. the plan for James Bay) they may either find it difficult to find spare processing clients or be now competing in a period where the established players can afford to drop prices for a while to make things difficult for these new operations to get on their feet or have the money to expand or pay back their debt.
The demand curve may be a couple of years from again going through the roof in the mid 20s, accelerated by increasing govt policy to ban ICE engines globally. This early 20's period with a set of new hard rock miners may find a difficult birth, struggling with debt and find themselves producing below cost and go to the wall. Established players may find a few bargains there, buying up the hard rock mines, ready for the next upturn in demand. (hello to GXY's period of bargain acquisition). Plenty of options. Galaxy has built and operated a processors before. They could even climb further up the value chain, or move sideways into other complimentary tech metals (cobalt etc).
Neither of these scenarios are that relevant to the share price next week, or even this year. I have no idea why Mac Bank, with their limited resources and research capability, would/could take such a long-term view of the industry when it is far from clear if and when over-supply will eventuate. I don't believe the Big 4 are stupid. They are investing hard now for the demand that they can see stacking up in their order books. They are setting up strategically, and Galaxy is following suit.
2017 should be a good year for Galaxy.
JL is already calling GXY a Big 5 entrant now that SDV is on the way.
Capable management with aggressive expansion and unhindered by legacy contracts gives us the edge on FMC who have done little in the last 12 months, in comparison to the hyper-activity by the other Big 4 (and us).
There is now industrial-sized down-ramping going on at GXY, which should make you wonder what is motivating it. It clearly is pretty well organised, with representatives of a particular company taking their lines from head office.
A professional company is at work on HC ramping a succession of spec hard rock lithium plays, with the same names turning up to each one. They don't hide that Galaxy's progress in the actual, real world of production and shipping is of no interest to them. They want the crowd to follow their spec picks instead.
Fair enough, I spose. They have seen the opportunity in a new resource where reliable information is still hard to find. A gambler has to make a buck, and these guys have seen the opportunity to turn up as a group, with the same opinions, each time to the new spec plays.
But bad drill reports, delays or messy legal situation have already wiped out several overnight and some people are losing a lot of money following them. DYOR.
The biggest losing gamble their operation has made so far was to paint Galaxy as the least sexy operation for big short-term returns - and now they have missed out on an early position - and exactly that big growth in value happening here, have decided on an increasingly unhinged campaign of misinformation and opinion.
Galaxy has at least proven that management can execute on their plans, can take fast and decisive action and that the funds/instos, and a well-respected major European bank are now willing to tip in cash to back them. Brokers are agreeing with them. Target prices are now climbing in expectation of good progress.
Steady state production from Mt Cattlin and immediately starting to set up brine production should score well with LT funds and investors looking to get on the ride before SDV (and JB) are eventually fully priced into the market cap.
Hold on to your valuable GXY shares and don’t let the down-rampers get to you.
It's kind of like the current weather around Ravensthorpe.
Galaxy's operation is up on it's own mount now.
Down in the valley, the negative opinions and the spec plays are swirling around. As per normal.
But it's only reasonable to predict that the temperature is only going to rise here.
There are 3 suns in this Galaxy now.
Good luck.
