Looks like the lithium industry is really on the brink, the first of many IMO. All apart of the correction before the bull cycle returns. Glad we have the boron off play to derisk a solo commodity project.
Glad ive invested in a company with some serious cash, ZERO DEBT, likely to be lowest cost producer of lithium in the world and with an experienced management that is educating institutional investors about the enormous potential of Rhyolite Ridge.Lithium bust puts Bald Hill mine on the edge
Peter KerResources reporterAug 14, 2019 — 4.48pmThe lithium bust is threatening to claim its first casualty, with the operator of the Bald Hill mine suspended from trading amid fears it could run out of money within months and is close to breaching debt covenants.
Alita Resources was deep in talks with its major lender Tribeca Investment Partners this week over whether it should continue mining at Bald Hill, near Widgiemooltha in Western Australia.
The mine is not profitable at current prices for lithium-rich spodumene concentrate, which based on disclosures by rival producer Mineral Resources have slumped from $US1070 per a tonne this time last year to $US608 per tonne.
Morgan Stanley estimates spot prices for spodumene concentrate are closer to $US535 per tonne.
Alita, which was previously named Tawana Resources then Alliance Mineral Assets, had $16.6 million of cash and cash equivalent at July 25.
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$1.230.82%View GXY related articlesAug 18Dec 18Apr 19Aug 191.001.502.002.503.00Updated: Aug 14, 2019 — 4.10pm. Data is 20 mins delayed.AdvertisementAlita expected cash outflows to be closer to $57 million in the three months to September 30, and while some of that spending has been deferred, the company appears to be at risk of insolvency.
Tribeca launched a natural resources credit fund last year, and consolidated Alita's various debts in March.
Tribeca has already waived several potential covenant breaches on its $40 million loan to Alita, but with an interest rate close to 15 per cent and no sign of improvement in lithium markets, repayment of the debt next year appears unlikely.
Rival lithium producer Galaxy Resources subscribed for shares in Alita earlier this year, and was the biggest shareholder in the company on Wednesday with 9.7 per cent, according to Bloomberg data.
Galaxy would likely be heavily involved if Alita's assets were carved up, given spodumene from Bald Hill and Galaxy's Mt Cattlin mine are exported through the same port at Esperance.
Combining Bald Hill with Mt Cattlin would deliver mine sequencing and blending efficiencies.
Prominent lithium industry adviser Joe Lowry indicated this week he would not be surprised to see a spodumene mine close in the near future.
''If spodumene goes much lower we will see the weakest mine idled,'' he said on Twitter.
Such a closure would highlight the extraordinary downturn that has hit the Australian lithium sector since share price valuations peaked in January 2018.
Since that time Galaxy shares have slumped by 70 per cent, Pilbara Minerals shares have slumped by 60 per cent, while Altura Minerals shares have fallen by 80 per cent.
Just last week US lithium giant Albemarle slashed its Australian spending plans by $US1.5 billion, announcing that it would now build two, rather than seven, lithium hydroxide processing plants in Western Australia.
Those plants were planned to process spodumene rock mined at the Greenbushes and Wodgina mines respectively.
Roskill analyst Robert Baylis, who correctly predicted in January 2018 that lithium markets were about to be swamped by too much supply, said Albemarle's cutbacks raised questions about the future strategy at Greenbushes and Wodgina.
"Albemarle's decision to scale back lithium hydroxide expansion in Australia unsurprising ... but what to do with all the spodumene concentrate capacity? Wodgina on care and maintenance or Greenbushes expansion scaled back is possible,'' he said on Twitter.
The savage downturn may convince some investors in Kidman Resources to vote in favour of Wesfarmers' $776 million takeover bid, which will go to a vote next month.
Peter Ker covers resource companies, based in Melbourne. Connect with Peter on Twitter. Email Peter at pker@copyright link
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