Not to be rude, but I'm afraid I'm going to have to get picky there
@vmp.
First point is the company has said they hope to get to $0 for
cash costs. Overall costs will still be very real, particularly depreciation/amortisation and tax.
Second is sodium sulphate wasn't included in the PFS, it was added later. So dropping it again makes no change to PFS numbers.
Third is the switch from sodium silicate to amorphous silica was the big kicker for opex. Amorphous silica is a lower volume AND a lower value product. I'm not sure about the price difference but I know they will only produce about 2/3 the volume of it.
Referring again to my notes from the AGM:
https://hotcopper.com.au/posts/36616223/single
- Amorphous silica is lower risk than silicate, as sodium silicate is a speciality chemical and their focus is on getting to lithium production first. Trying to make both sodium silicate and lithium carbonate from startup in the same plant was too risky, so they started looking for alternatives to sodium silicate that could get them to production quicker. That’s where S-Max and the amorphous silica came in.
- The plant could later be retrofitted to do lithium hydroxide, but they're focused on carbonate right now. Similarly, they may decide to go back to sodium silicate in the future, but for now amorphous silica is an easier and cheaper way of getting to production, with focus being on optimising the lithium production. Optimising byproducts will come to the fore with the luxury of cashflow
- Interesting to note Cynthia Thomas chimed in here to help answer the question. It is one thing to know independent directors have been brought in to manage risk, but it is good to see she has clearly had direct input into such a major derisk
- As a result of this, don’t expect C1 cash costs to be $0 off the bat, as a new plant starting up, they have to ensure the lithium quality is there first, and the result is that the early margins from byproducts will suffer.
- Amorphous silica is a simpler, but lower quality and lower volume product, so the profit from byproducts is reduced. This point is needs to be considered with the one above.
- They are still confident they can get P1 to $0 cash costs in time, and P2 even lower, but there will be learnings along the way.
Importantly, someone asked if it will still be competitive, to which Joe said yes, especially when you consider that a lot of the brine operations are only so cheap because they were built a long time ago, and no longer have depreciation/amortisation in their C3 costs. New brine and hard rock expansions aren’t coming online that cheap either.
Now obviously the comment about carbonate is no longer valid, but I don't see why the rest should have changed.
All up, what I'm expecting in the DFS is numbers that aren't as amazing in the first few years, as they get into production and get cashflow. I then expect to see stages of further capital investment; first in debottlenecking and then improving the value of the silica products.
Ultimately it will take a few years to really dial in the $0 cash cost situation. I think it is important we remember that starting up a hydrometallurgist plant is complex, and it will take time to properly print money.
Cheers
. What matters in the long run is ‘the business as usual’ P&L.
(20min delay)