Banks miss the boom
While the small end of the resources sector feasted on the lithium boom, the same can't be said for Australia's banks.
"Definitely on the lending side the banks weren't there, they just weren't there," recalls Neil Biddle, who ran Pilbara Minerals when its shares were worth 2¢. The stock traded as high as $1.22 earlier this year, and was fetching 88¢ this week.
"They [the banks] just couldn't get their heads around lithium at all. I still doubt they could, I doubt you could fund a lithium project today through an Australian bank, certainly none of the tier one banks, it is still not mainstream enough for them."
The new generation of Australian lithium mines were funded by end consumers (such as Korea's POSCO) who rushed in to sign early supply agreements, US debt markets, specialist resources funds and retail punters, who have been zealous supporters of the sector.
Brisbane-based Orocobre, which has a lithium operation in South America, relied on its partnership with Toyota to get affordable debt from Japanese banks.
Lithium is not traded on commodity exchanges and that lack of transparency on pricing and contract terms has restricted the ability of traditional banks to manage risk and establish hedge positions that would normally underpin debt facilities to resource projects."
Unlike major commodities like gold and copper, lithium does not have a single global benchmark price that lenders and investors can track.
The major price reporting agencies publish up to 30 different lithium prices in their bulletins, with discrepancies existing across geography, product grade, chemical state and whether the lithium is sold on long-term contracts or the spot market.
In the search for a barometer, many local players watch the price at which battery grade lithium carbonate with 99.5 per cent purity sells into China. That price has surged from about $US4900 per tonne in September 2014 to about $US20,000 per tonne in recent months.
Read full article
GXY Price at posting:
$3.25 Sentiment: Buy Disclosure: Held
