Once again into the breach, page-81

SP drop could have something to do with Neil Biddle's (PLS director) letter to the Dryblower where he basically rehashes a lot of JL misinformation on ORE. For example, we're only producing 98.5% purity (contrary to published evidence) and this being the reason for the low prices being we're receiving, rather than the fact that our sale price reflects contracts signed years ago.

The upcoming quarterly should correct this.



I refer to Dryblower’s thought-provoking article “Dryblower explores the increasingly interesting world of lithium”, published on 26 September.
Amongst other things, Dryblower asks four key questions in this article:

1. What is the current price of lithium carbonate?
2. What is the likely future price?
3. Is there a lithium glut waiting to wash over investors as it did with iron ore?
4. What source of lithium will be more profitable brine or hard rock?

I would particularly like to address points 1 and 2, while making a few brief comments on 3 and 4.
Point 1 – the current price of lithium carbonate
Lithium Carbonate is a chemical product that has a range of specifications according to its end use. It is not traded on any transparent exchange and its pricing is set by contract between buyer and seller. In general, the minimum spec for battery grade lithium carbonate is 99.5% Li₂CO₃ (LC). For other products such as lithium-ion battery electrolytes and pharmaceuticals, the specs are much higher – up to 99.99% and sell at much higher prices, e.g. +$US30,000/tonne.
All new projects require a certain amount of time, including a commissioning period to ramp up and achieve target product specifications. During its commissioning period, Orocobre (according to our understanding) is largely producing a 98.5% grade instead of 100% output of Battery grade 99.5% LC product. Fortunately for Orocobre, the timing could not be better for it to receive a much higher price for an off-spec product compared to what was forecast in their DFS for an on-spec Battery Grade LC product.
However, the point is that the global average price for lithium carbonate today is far higher than Orocobre receives for its product. To describe their reported received price of $US7,535/tonne as “more like the real price” and a “wake-up call for silly stockbrokers and company promoters” is simply not correct.
There is also a big disconnect between China and international pricing due to the high demand for the product in China. However, as the contracted prices for product elsewhere are generally short term (3-6 months) the price outside of China is increasing as these short-term contracts expire. The China-International price is rapidly meeting parity and, I respectfully suggest, will be nearly double the current Orocobre price.
Point 2 – the future price
The likely future price has no relevance at all to what Orocobre is receiving today for a sub- spec (off-spec) product.
Point 3 – the ‘looming supply glut’
The lithium-ion boom in EV’s and new energy storage is currently in the nascent phase. Like any relatively new industry, I expect the lithium sector to pass through several stages of growth and maturation. We’ve already been through what I would describe as the period of youthful exuberance; now, the sector is slowly beginning to mature and investors are beginning to work out which projects have genuine prospects and which don’t.
The pendulum will continue to swing backwards and forwards a few times yet, but I think it’s important that investors receive a balanced (and realistic) assessment of the market’s long-term potential.
Point 4 – is brine or hard rock more profitable?
Finally, I heartily agree with Dryblower, and many other analysts, that hard rock projects will be more profitable than brine projects – for the time being at least. They will be able to ramp-up faster; they are far less capital intensive; and they will be the best placed lithium projects to meet the supply/demand gap over the coming decade.
The investment and acquisition by one of the world’s largest lithium producer, Albemarle, in a lithium mine (Greenbushes 49%) and in a Chinese hard rock converter (100%) – despite owning the world’s best known brine deposit – is I believe the strongest possible evidence to support this point.
Yours faithfully,
Neil Biddle
Director – Pilbara Minerals

http://www.miningnews.net/insight/from-the-editor/letter-to-the-editor-dryblower-4/