Probably goes without saying that I have a lot of respect for the posters on this forum.
Some really good posts lately by very clever and switched on people who have taken on the giant task
of coming to grips with a very difficult sector to understand
at the brink of its mass acceptance and adoption
with all that entails,
from unbridled optimism through to manipulation and downright dishonest reporting and analysis.
As the kids say, many posters here are
Woke AF.
You have to be.
Or you get handed back your lunch money (or have it stolen from you) and told to be on your way.
So without wasting too much of your valuable time,
I’m going to take a shot at the week that was.
NK? Phht.
While the heated words fly in public the 2 countries have opened a little diplomatic backdoor
for the negotiators, and they will do their little job
of saving face for their respective (but not respectable) leaders.
Not much reporting on this but it has happened
and there is a path to defusing the tension quietly.
The US market drop was as much about a bit of profit taking from recent highs as anything else.
The Australian market was already subdued and that implies
the market has already priced in a fair degree of caution recently.
I don't know how much more cautious Galaxy can get. Push it down and it will only spring that much harder.
My bet is that all it means around here is that retail is further losing its grip
and instos/funds are happily adding to their positions.
US market saw recovery on Friday and I expect the same here on Monday.
There are plenty of historic examples of how the markets respond when brinkmanship is resolved.
The Cuban Missile Crisis had a basically flat market for the whole tense period
and rocketed off upwards as soon as the tensions abated (and within 10 years the S&P had virtually doubled).
I bought a few more on Friday close.
I’ll see pretty soon if my call was right.
Nothing has substantively changed and my money is on humanity’s ultimate common sense.
(don’t laugh)
That is what brought me to lithium and to Galaxy too.
We must have all ended up here for quite similar reasons -
Low Risk (one asset already making money) + High Reward (2 huge assets to price in).
For me, the next lithium generation of future producers are still Medium Risk - Medium Reward.
Medium risk because they’re not built or running or making money
and still exposed to construction disappointments and onerously priced debt that could see their resources
disappear if there was ever a financial headwind that caught them out.
(see Jiangsu)
Medium reward - because at least one has already reached a massive valuation for its preliminary stage,
and, after the long construction wait, the eventual first shipment will be sold down out of pure exhaustion.
Its hard to say when to enter these plays. Even some of their biggest promoters have got bored and gone elsewhere for excitement.
They are single asset plays and ,in time, they will likely be taken over or swallowed
before they are allowed to get too big. This will not necessarily happen when its most advantageous to holders.
Beyond the next couple of miners already with deals
the rest of lithium to me is just
High Risk.
Whatever reward is there until the play-makers or there reality of the task ahead pulls the rug.
Then its all over red rover.
Plenty of small lithium companies have sunk over night on bad drill results
or failing to live up to their own hype.
As soon as the micro-junior bubble bursts, the reality is that they may never make a cent from production,
or won’t do anything substantial for many years
as the more established players squeeze them out of priority for finance and contracts.
If you’re tempted by that little lithium starlet de jour in the DRC
I suggest that you Google up the name of that Chinese company that they’ve done a deal with and add child labour to the search.
Yes. An ASX company willing to get into bed with a Chinese company unapologetically using kids as young as 4 years old to mine cobalt.
A new low for ethical investment? - or a business opportunity? Your call.
And you can see how certain people got involved with them.
After the Chinese company refused to apologise for child labour
they were actually asking Sky News for advice (lol)…
They have already been black-listed from he supply chain of most major battery businesses
who want nothing to do with them. Truly the cellar dwellers of the Chinese battery business.
Some people just don’t give a damn about how they make their money, I guess.
Meanwhile back on the Galaxy Ranch
@bobsacramento and
@Thesi have all the lines drawn up to our next clients/customers/partners
and what was always going to happen, will happen.
Say what you like about the recent share performance,
the company’s management have made some giant steps forward this year
and what they have to offer, as capable hands and producers is going to come to a head soon.
Even the much-maligned consolidation has resulted in some very big names getting on board.
Beyond BlackRock, we now have a large positions taken by Oppenheimer and the Norwegian Sovereign Fund.
Instos and funds have done their DD and seem completely calm about the manipulation going on.
They are probably loving it. Their window for investment is much more in line with the LTs here.
They can see the 3 assets and they can see the share price/PE ratio.
The 2 do not match up. Nowhere close.
Most of the short action I believe can be traced back to UBS.
Even they have just upped their demand projections by 50%.
I’m not sure how long they can hold the reins on this as the lithium carbonate price has already smashed all brokers’ and banks' predictions for 2017.
Their own quants must be telling them they’re on the wrong side of the trade/history/the sector's momentum.
Are they simply killing time before the deals for SDV, JB are announced?
Companies don’t start trotting out little details of contracts until they’re close to pushing them over the line
and AR & AT's “10 year offtake with Big Auto” is a relevant detail too big and too specific to miss.
Unless you believe the company is simply spouting empty and desperate words - its unlikely that they’d be putting it out there,
otherwise the companies that they’re negotiating with would simply ask them - “oh yeah, who is offering that?”.
That would be the end of that particular round of negotiation.
I’d say this is the auctioneer’s hammer moment.
Galaxy are declaring the terms that other last minute bidders will have to match or exceed
if they want a shot before the hammer comes down.
My puny brain struggles to deal with the details
of how such a big deal might look and operate.
There is a lot of capex to cover for the 2 projects.
Mt Cattlin can contribute solidly but there is a big investment needed and it will
either have to be a very large company or a consortium that is able to put this kind of financing down.
In return, Galaxy can put about 100ktpa of lithium carbonate/hydroxide supply into a client’s supply chain within a few years,
far more than even the “massivest" lithium hard rock mine could ever manage to operate without
falling victim to the lower returns from large lithium mines
( see Greenbushes and cross-check their 700Mt plant against the actual Bunbury shipments).
That is pretty much why I bought more on Friday.
We had an unfortunate day in the global news cycle media frenzy machine - until it dies down and is replaced by the next celebrity nip slip,
but fundamentals are flying and technicals were already starting to build up for a big run.
The disappointing drop on Friday was on relatively low volume as the majority of holders just girded their loins and watched on stoically, knowing its just a matter of time now before we get a giant TH and the news we’ve all been waiting for.
All the best for the week ahead
AC
