The analysts at the West yesterday presented some research on the costs associated with lithium mining, and unfortunately, it was not good news.
They analysed all the West Australian lithium miners and their costs, compared to the current spodumene prices.
They showed that only one (1) is actually making a profit, in other words, only one has an AISC that is lower than the price of spodumene, and that was IGO.
All the others are making significant losses.
Of course, this was not actually any new news, just on the weekend Ellison also said no-one is currently making any profits from mining lithium, though the statistics actually show the only exception is IGO.
So MinRes can survive because of it's iron ore, and it just shows the power of diversity. Some others may survive because they have gold, but not many.
MinRes are off-loading assets and investments in order to survive through to 2027 with their lithium projects - as they (Ellison) put it.
Unfortunately, LTR can also not make a profit at these spodumene prices, and it has debt to repay for the building of the mine, which means if it also wants to survive through to 2027 then it will need to also take remedial action, proactively, and it's probably more important for LTR than many others, because LTR is a one-trick-pony, it doesn't have any iron ore, or copper, or gold to see it through this period.
I can only think of two or three things that will see it through.
Either put the mine on care and maintenance for a while, after re-negotiation of repayment terms.
Or bring in a financial partner to buy a portion of the project, for a price.
Or attempt a capital raising, which at current levels, would probably be done at around 50 cents.
This result was not supposed to happen, and some will argue, probably fairly, that the causative reasons were not within the company's control, and they may have an argument there, and a good point, because China and global recessions are also a factor.
So, it is, what it is, now - and needs to be dealt with, as Ellison puts it, there is no sense in burying one's head in the sand and hoping it will go away. Realism and some objectivity must take hold.
Gw
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