GXY (ASX) How's this for a theory??

Originally posted by yanlin ↑

The silver doughnut at it again. This is from their Commodities team (on 23 January 2018):

Battery metals (Co/Li) – death by a thousand pits
 Cobalt and lithium both enjoyed a thoroughly bullish 2017, as the EV buzz story lifted prices and stocks dramatically. However, all that enthusiasm contains the seeds of destruction – a significant amount of new supply of Australian spodumene has been greenlit and is now crowding into the market, and we see this pushing lithium into major surpluses until 2022. And this is still ahead of whatever increases may be driven by SQM’s very recent deal with Chile’s development agency, Corfo, that will allow output of up to 2.2Mt of lithium carbonate equivalent (LCE) by 2030. We continue to believe that this market is teetering on the edge of a considerable sell-off, and recent sobriety introduced by the SQM news may just be the beginning. We see prices of lithium carbonate CIF China moving back to around $7,000/t at the nadir.

My peanut brain cannot understand how Macquarie can be so down on the price of Li, placing an "underperform" rating on GXY, yet upgrade their outlook on other Li players such as PLS (with an "outperform" rating on them)....... aren't they operating in the same market with LCE pricing determining the bulk of their revenues??

The hypocrisy is breathtaking and the bullsh@t knee deep.

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Sounds like the "Silver Donut" is a walking contradiction, this was posted by @Abu2121 over in the PLS forum. (Thanks Abu2121)

https://hotcopper.com.au/threads/lithium-shortage.3977572/page-12?post_id=30552328#.WmkLd6iWabg

This paragraph in particular is relevant:

The Macquarie report, however, was dynamite for the lithium industry, because it is the first to analyse the detail of the deal between SQM and the Chilean Government, including a breakdown of the punitive royalty regime.

Under a deal which also catches US-based Albemarle, a 6.8% free-on-board royalty will be replaced by a sliding scale using the price of lithium carbonate as a guide with the new starting rate (when the price is less than $US4000 a tonne) being 7%, rising to 10% when the price is between $US5000/t and $US6000/t, and then up to 25% when the price is between $US7,000 and $US10,000/t – peaking at 40% when the price is more than $US10,000/t.

That royalty regime explains why Kidman Resources is not concerned about its joint venture with SQM at the Mt Holland hard-rock lithium project in WA, where royalties are a fraction of that being introduced in Chile.

I'd advise heading over to the link and reading the full article when you have a moment.