I don't disagree with your comments, but I'd like to add my perspective.
The underpinning rationale for support to Mt Marion is clear, and that is the desire of the Chinese state to maintain their dominance of the supply chain as long as possible to build their market share in all things associated with electrification. What is also implicit in this action to support the Minres JV is that current supply demand balance is on a knife's edge, with every tonne of LCE being vital to prevent the price rising.
In my opinion this is like a balloon being inflated within the confined space of a capacity constraint that is restricted by underinvestment (pressure must be rising). It is apparently the hope of those in control in China that somehow they can delay the obvious looming demand crunch long enough to avoid an explosion in price of battery constituents.
I assume the loan is equivalent to AUD75m for each JV participant. While I don't profess to know the actual application of funds here, I think it is most likely needed to not only support loss making production, but also support the ongoing capex requirement for the underground development declines and drives that Chris Ellison is punting on to get them to more high grade pegmatites some 350m+ depth from surface...news item 12 April 2024 extract... "Drilling confirmed the North Pit underground ore body is vertically dipping with a strike length of 500 metres and a thickness of 30 to 60 metres. Pegmatites were intercepted around 1.2 kilometres below surface."
I recall him saying in an earnings call before things went pear shaped with his indiscretions, that they had done some diamond drilling that led them to decide to go underground. The remarks sounded quite like it was a risky undertaking. Again, if true, the support from Ganfeng to spend money and push so strongly in risky circumstances, says a lot about the positive medium and long term demand scenario that the big players are seeing and the risks they are prepared to take to be ready to take advantage when it happens.
LTR while facing headwinds, is at least well advanced now with its optimising mine plan. In around another month (quarterly report) we will get some insight to LTR's current cash flow performance and response to the weak pricing environment as well as some predictions of market circumstances in the second half of calendar 2025.
Regards DF
LTR Price at posting:
70.5¢ Sentiment: Buy Disclosure: Held
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