That’s pretty much where I see things.Anyone who does a bit of...

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GARETH78

8,370 Posts.

2976

08/08/24

21:54

Post #: 75133031
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Originally posted by dawgfather: ↑

Short positions take a lot more risk than long positions (by default), so most people opening short positions are generally very well informed (so I agree with your premise that most short positions are aware of when potential catalysts are going to drop).

Having said this, its not difficult for anyone with some curiosity to estimate when the DFS is coming as well as the offtakes (Tony stated end of Sept in this weeks webinar).

You then add in the current futures and spot price trend (futures and spot prices have managed to drop every single week since the end of May). So day on day, the underlying commodity price which is the basis for every lithium equity valuation is falling every single day. Day after day.

Plus, you can throw in the recent volatility globally due to Japan.

So you can see the number of factors which stack up in favour of people wanting to make money by seeing lithium equity share prices falling. Anyone who went short on LRS at 26 cents and help their position open until now has made very good money.

If I can provide some competing arguments:

- Lithium chemical and spodumene prices have fallen significantly further than almost anyone thought they would - any further downside from here is likely to be less than 10% in my view (~80,000 as at today less 10% = 72,000). (positive if you're long on lithium).
- Depending how long chemical prices stayed there, this could mean SC6 ends up around $550-$600/t believe it or not. These prices would leave MIN, PLS and SYA making large losses (especially when you discount from SC6 to their actual production grades). It would also leave Sigma making zero free cash flow. Effectively, hard rock production globally wouldn't make money.
- What is the logical outcome of $600/t for SC6 (an enormous supply deficiency at some point in the future because nobody will be expanding and no Australian and Canadian developers will be able to make progress.
- The argument for remaining long on LRS, is that capital will find it's way to hard rock projects which prove they can operate at free cash flow at any point of the lithium cycle (my argument is that Colina is one of these mines).
- The argument for shorting LRS is that the DFS won't act as a catalyst (even if it shows low opex and capex) and that LRS won't be able to attract significant prepayment and/or funding to get construction underway.

Sorry I've started waffling through this post, but you can see there are competing arguments both for shorting and for remaining long.

The reason why people can make good money on stocks like LRS is that by taking risk, you are rewarded when the stock successfully navigates its way through and past that risk.

So anyone holding LRS for the next few months is banking on the expertise of our management to get the DFS published with solid numbers and then attract a big prepayment from a respected brand.

Expand

That’s pretty much where I see things.

Anyone who does a bit of donkey work can make some estimates on the DFS. For Pan Alto I will be surprised if that did anything.

A decent Pre payment along with an equity stake (at a premium) similar to Ganfeng and PLS when they were starting out would boost the SP.

Other than that we are at the behest of the Lithium price. The bottom can’t be far off, could prob go to $700 before maybe MIN and PLS would look to trim production.

IMO

LRS Price at posting: 12.5¢ Sentiment: Hold Disclosure: Held
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