ore vs. gxy?, page-6

Brief response from me too.

Couple of interesting facts and production cost estimates.

1999
Price of LiCO3 was under US$1 per piund ($2205 per tonne) as the SQM production had come on stream for a couple of years. Basically I'm not sure they were making much money but ALL the spodumene mines closed down except Greenbushes which hung on by it's fingernails I believe with tantalum credits and SOGs support. After potash credits (which I understand might actually make SWM more money than lithium) high quality brine is very cheap production.

Keith Evans (undisputed world lithium expert and keeper of all knowledge) recently stated in an article:

"two years ago SQM estimated production costs at between $1.80 to $2.20/lb . A former North Carolina producer recently gave a ball-park estimate of $2.50-$3.00/lb for production from the former operations there. "


The North Carolina producer was a spodumene producer. Now while I believe the $3 for spodumene, no-one really knows what SQM are actually producing lithium at for two reasons. First they produce lots of potash etc and so cost sharing/shifting is subjective, but mostly because they pretend it's higher than it is and otherwise try not to reveal anything concrete. This is because SQM are the strongest part of a duopoly and want customers to think that they are only making modest profits otherwise these customers might get filthy. In fact I believe many are a dark because SQM underproduced in recent years prolonging a lithium carbonate squeeze to keep prices up.

Now nothing is concrete, cirumstantial evidence strongly indicates that quality brine can make some money after potash credits at US$1 per pound ($2205/tonne) as they knew they would have to in the late 1990's, seeing out the spodumene producers and oversupply their entering the market would cause. Maybe it is a bit higher than US$1 but it sure is cheaper than stripping, mining, grinding, concentrating, cooking up at >1000 degrees to produce lithium chloride (perhaps LiCO3 if new technology works). Lithium batteries are made from LiCO3 feed stock and a couple of years ago some manufacturers were buying LiCl to re-process it into LiCO3!

On the sovereign risk side I don't believe it is an issue even on the radar ATM. Very supportive locals of a company with many well respected Argentines employed at high levels. Local government in Salta is pro-mining and the shallow eastern side of Olaroz Solare is currently being mined for borate or such. Rincon down the road has received all necessary mining approvals and FMC mine Humbre Meurto a bit fyrther away still. Government gets good royalties as they should and nothing if it doesn't get up and running. Hardly a deposit of national interest on the scale of large copper-gold mines etc. Great ore body but only a modest yearly production of chemicals largely shipped off-shore. Personally I would be more concerned about having production based in China with their record of price fixing, export quotas and internal market manipulation.

The biggest risk with a new lithium mine is the price drop from an oversupply shake-up. Firstly this why the share price of both GXY and ORE are so low, because not many think a new mine will actually get financing and up and running. If they do get finance but their is a period of oversupply then the high cost mines will shutdown, get taken over by the bank and floated off again next boom. ORE should be equal lowest on the cost curve (ie comparable to SQM but better than Rincon) and therefore stay profitable during any price squeeze and therefore will be the mine most likely to attract finance to start....IMBO:)

goodluck all