PEER COMPARISON THREAD....LITHIUM COMPANIES ,THE EV REVOLUTION IS ON !

Updates:

1. Update on data around demand and amount of new spodumene mines - Post #:55224139 Does depend on mix of carbonate/hydroxide - Post #:55224139.

2. Construction risks in WA and how companies may plan to address it - this is a key risk in operating in WA for example during a construction boom/skills shortage - Mining: Lithium giant’s lament over labour shortages, cost blowouts in WA amid COVID (copyright link)

3. SYA added to the mix of comparisons. Its DFS is quite old so would be expecting an upgrade in terms of project configuration and extension of mine life plus would expect it possibly looking at downstream processing - Post #:55297938

Spodumene prices - long term

4. Spodumene prices - why IMO they will not stay as high as some think and why long term US$650 - US$ 700 per tonne a better number in DFSs etc for new entrants - Post #:54929497

Below is a slide taken from PLS presentation - Post #:54990470:

Let's talk about this slide noting PLS sold 5.5% li20.

The current lithium hydroxide monohydrate price on the LME is US$15.75 kg, or roughly US$15,750 per tonne, noting as per earlier conversions I did on this thread that you need 6.5 tonnes 6% grade spodumene to produce 1 tonne LiOH.H20.
London Metal Exchange: Lithium prices (lme.com)

The lithium carbonate price is about US$13,500 per tonne, noting you need 7.5 tonnes 6% spodumene to produce 1 tonne lithium carbonate
Lithium carbonate min 99.5% cif China prices | Lithium Prices, charts, and News – Argus Metals (argusmedia.com)

Some maths using the above slide:
i. . 5.5% Li20, is what PLS sold. The first thing to do is what would the price be if it was 6% grade. Answer is 6%/5.5% *1250 = US$1,364 spod price 6% concentrate equivalent for PLS sale.

ii. If this was used to produce carbonate, the input cost is US$1364 * 7.5 =US$10,230 spodumene feedstock cost to produce 1 tonne carbonate, which in effect accords with the PLS graph above (May 2021 sale).

iii.. If used to produce hydroxide spodumene cost base in the converter is US$1364 *6.5 = US$8,870 spodumene feedstock cost to produce 1tonne lithium hydroxide monohydrate.

Now lets introduce the processing costs:

iv. In terms of the above we are replacing the spod costs in the above old pic with [points i - iii above, noting the pic above as explained in an earlier post on this thread is about a vertically intergrated miner producing carbonate/hydroxide as the final sales product.

v. In producing carbonate, above pic saying processing costs are US$3000 per tonne, which is roughly in line with PLS pic too. Need to add this the spodumene feedstock cost of US$10,230. What do you see - well, at a carbonate price of US$13,500 per tonne the carbonate producer is making no profit using that spodumene as a source for making carbonate at the price PLS sold on the spot market. So unless carbonate prices go up well spodumene prices must fall. Why will they fall - look at the economic rent PLS is making on its spodumene sales. It is making a wad of cash and that means new entrants and that is what happens in any commodity sector as it is easier to build mine capacity compared to manufacturing capacity. It is why Australia is a dig it up and export nation, and its fortunes always reside with what happens to commodity prices. Noting the processing costs above are old anyway and likely to be higher now IMO

vi.. Now same exercise hydroxide because I suspect this is where the PLS product went too - add US$3,000 per tonne processing cost to US$8,870 feedstock cost (see point 3 above) and the cost becomes about US$11,000 per tonne, still meaning hydroxide producer making money. But this is the point, PLS is making about the same amount of money now per tonne of hydroxide produced as the hydroxide producer, but it is the hydroxide producer with the greater capex costs btw and opex costs. If people believe that miners make more money than manufacturers, here been the hydroxide producer, they would be mistaken as it turns the logic to far around because Australia may as well remain a dig and export economy and not entertain manufacturing where capital costs are significant. Where you make money and entrench money is by becoming a hydroxide producer because it is harder to enter that market, because of capex costs and opex costs, than been a miner is my point. Always has been the case.

vii. Obviously what allows prices to remain higher IMO for spodumene sales is if hydroxide and carbonate prices move up, but at the end of the day you still need to keep EVs affordable is a key point to takeup. What would happen to the price of an EV if say hydroxide prices were US$20,000 - US$25,000 per tonne or even US$30,000 per tonne long term?

viii. Certainly brownfields projects IMO will benefit from the current higher spodumene prices. Certainly the hydroxide market can pay a higher price for spodumene sales than the carbonate market too. However, when you find spodumene producers are attaining significant margins, and the market is anticipating significant margins, that is the trigger for new supply. New supply means price stabilisation, and prices can only grow if carbonate and hydroxide prices rise is the point. Manufacturers make the return is the point, and therefore why spodumene producers are looking at downstream process options themselves. We only have to see what happened in 2019/20 to work out what an oversupply in spodumene can do to market prices, and prices of above US$1000 per tonne are the trigger for new entrants to market, which means prices fall. And returning to my comments above, if long term contract spodumene prices are too high, well downstream converters would stop buying and demand would reduce, because ultimately your chemical producers need to make a profit.

ix. Happy to be wrong by the way, but like iron ore, when prices get too high markets correct. Hence why I stick with US$650 per tonne to US$700 per tonne as a long term price. Most DFS released the last two years - SYA, LTR, AVZ - used this number by the way and used that number despite at the time of their DFS's spodumene prices been way lower than there DFS inputs as well.

All IMO