The volume offered was 5kt or under 1% of PLS's planned volume. It was a marketing stunt and nothing about what average prices will be, might be or should be. PLS has a seriously large shorts issue to deal with (As does Albemarle). Any announcement being made by them will have this as a background consideration. Because of its length being out to December, this trade unfortunately still leaves a 50% chance of $1,000/t prices in 9 months. What if you figured Spod prices weren't very good at staying stable but there was a 50% chance of $1,000/t and 50% chance of $1,500/t. Your expected average price is $1,250/t therefore buying at $1,200/t is below the expected average. You might lose $200/t relative to buying at spot. You might make $500/t relative to buying spot. If you think both are equal chances, its a good bet to take.
IMO this incentive price stuff won't work because no mine has a 3-month lead time from FID to production. They are typically 18 months or more from FID till the first ore in any reasonable volume. The buyer and seller who set the price today don't give a toss about whether someone's project giving supply in 2 years will start. The buyer isn't going to pay an in-production mine any more than they need to. They certainly aren't going to go all altruistic and say here's $500/t more so that the market price is high enough for GL1, GT1, DL1, LRS or some other project can raise capital and start.
Personally at current prices I think Core will restart before we see other western mine closures. They have high grade ore in Grants (1.4% reserve, 1.47% resource). The particularly high costs would appear to be due to ROM build and high levels of early project strip work (the same issue SYA has). Given the levels of mining expenditure all expenditure to date has been at above life-of-mine strip ratios meaning the residual life of mine strip ratio for Grants is below average. The expected average cost was ok and now they have below average remaining. Who's not going to restart that? What I don't know is what sort of setback to higher prices a Core restart might have. On the speculation side, I think the pause in mining was to create a disconnect between the past high cost structure and the new low future cost structure. The ex CEO GM had a grand plan but didn't sell it to everyone properly and the board decided an even better disconnect between old and new would occur by also tossing the CEO out as well.
What that however all means is new projects are going to struggle during 2024 to get funding for FID. Most won't meaning an increased chance of shortages around later 2025 / 2026. Those shortages will mean high prices and PLL's NAL offtake generating some serious cash but it may take patience to see this unfold.
PLL Price at posting:
20.5¢ Sentiment: Buy Disclosure: Held
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