This is another reason why I have chosen TAW as my single lithium exposure, at least for now. No/marginal amounts of debt compared to peers. This year TAW should have debt paid down, fines circuit paid for and a reserve built up leading into 2019.
If a global downturn happens and it will before 2020 (its been one of the longest bull runs in history the one we are currently in) maybe this year/next with rising rates, nobody knows, how hard will it be to get finance for expansions? With all the "uncertainty" around oversupplies, likely not going to be easy.
How many off take partners will go bust and/or not be able to pay for the supply contracts they have entered into?
How will a global downturn effect demand for lithium?
These are the major risks for near term lithium companies in Australia imo.
The explorers will be in dire straits in such a situation.
Accumulating a good cash reserve is essential for any upcoming producer imo.
Who will pump high capex/a few hundred million into AVZ/BGS during a global downturn with massive economic headwinds on top of jurisdiction risk on top of oversupply fears when you can pump a lot less into an existing Australian proven producer to expand instead, thereby reducing your risk massively? If you can expand when things are in a downturn you come out the other side with huge advantage.
For TAW future capex requirements to expand can be achieved with FCF. PLS/AJM/KDR need major bucks to fund expansions and between the debt repayments they will have to service im not sure where that will stand. TAW will most definitely get hit in such a situation but im hoping they can come out the other side stronger, once off take partners can keep there side of the deal. PLS easily has the best off take partners and KDR are insulated in that regard being in partnership with SQM, but partnerships with big players like that has its own set of problems too.
