PLL General Discussion, page-952

Miner vs Refiner
Or in PLL's case Integrated Miner/Refiner vs Refiner
The integrated projected (like CLP where Mine & Refinery will be on same site) or even TLP where PLL is refining its share of mine's SC output are most advantageous.

But what about just mining (i.e. just a spodumene producer ... say for the avoidance of argument Pilbara (PLS)) versus a refiner (and again what I would have in mind is the Chinese buyer of spodumene ... say Tianqi)

PLS in Dec noted a price for contract pricing of ~$6,300/t for its spodumene.
At its latest auction it revealed a price (well it didnt reveal the actual price) sold its spodumene under a new pricing method - called "lithium hydroxide tolling" whereby Pilbara receives the value of the lithium hydroxide sold by its customer (the buyer of its spodumene), less an agreed amount for conversion and other costs.

I've certainly seen this before in natural gas and LNG production - whereby a LNG producer seeks to purchase cheap natural gas (an where else bu the USA or ME for that) and freeze to LNG and ship it to a country which does not have abundant natural gas (also sounds a bit like Australian producers STO & WDS). Its well known in that industry what the "tolling cost" is ... roughly $2-$3/Mcf. As a US producer I might be able to sell Nat Gas at $4/Mcf (wide variation over time) but I could also sell it for ~$14/Mcf by paying someone to convert it to LNG and then pay shipping. As the natural gas producer I make more profit. The difference with lithium sources is, it is nowhere near as abundant in supply and the refiners must compete for available supply

The inference is simple - ore production (spodumene) is far more valuable than ore refining (Hydroxide) in the lithium industry. This has been banged on about by me and others here ... the answer lies in the EBITDA MARGIN ... compare the market ... Simples

Roughly speaking to produce 1 tonne LiOH, ~7.5 tonnes of SC6 are required. I'll use an easy $5,000/t price for SC6 implying $37,500 raw material input cost. An efficient refiner might be at $2,500/t for refining costs making final cost of production $40,000. If that LiOH is then sold at $50,000 the refiner's EBITDA margin is 20% (($50K-$40K)/$50K) - pretty decent but not great.

PLS on the other hand says costs are about US$1,000/t all in (staying with simple math) so, their margin is 80% (($5K-$1K)/$5K)
... which is great. Worth noting is PLL's margins will exceed PLS' (esp from Ewoyaa).

But that new pricing PLS referenced suggests something different. If refining costs (ex SC6) are $2,500/t in the example, they will still be $2,500/t irrespective of whether LiOH sells for $50,000/t or $75,000/t or $25,000/t. So if PLS were to say pay the refiner "cost + 100%" (and for the refiner if those "other costs" are $1,250 plus profit margin of $1,250 ... then the refiner has increased its operating margin to 25%). This margin will not change, irrespective the ASP of LiOH. Refineries don't build themselves so the Capex has to be included in those other costs. Chinese refineries much cheaper to construct.

PLS is committing to paying $5,000/t to get their SC6 converted to LiOH by a refiner. So in reality, PLS all in cost for 1 ton of LiOH is $7,500 (the SC6) plus $5,000 (tolling charge) = $12,500.
Margin at $50,000/t LiOH is 75%
Margin at $25,000/t LiOH is 50%
Margin at $75,000/t LIOH is 83%

What could possibly be the economic reason to produce carbonate from spodumene when you can sell spodumene to refiners at under such a pricing regime?

That answer IMO, lies wholly within the sales price of LiOH - and the politics of Quebec & JV. So, that being the case, if 1 JV partner was committed to producing carbonate and the GoQ was similarly inclined, then why not commit to "tolling" the SC6 share of NAL production that was committed to PLL. GoQ pays SYQ the 25% Capex for Carbonate Refinery, SYA pays SYQ the 75% Capex. PLL commits their LoM 50% SC6 from NAL and receives (the same as PLS method) value of the lithium carbonate sold by SYQ (the buyer of its spodumene), less an agreed amount for conversion and other costs, which at 8t SC6 for 1t Li2CO3 selling at $50K is margin of $37,800 to PLL per ton of LiCO3, which appropriate floor and celiling prices - I say that only because the greatest share of the upside should belong to the party taking the greater risk - which is SYQ. So for example the upside might be capped at ASP of $75K/t for LiOH. Conceptually similar to the ceiling price ($900) PLL committed to when SC6 ASP was around ($600).

I doubt it would happen ... GoQ is not a risk taker it seems ... talks a big game though. There's a lot of things it could do to influence the economics of a Carbonate refinery.

The integrated miner/refiner is the forward path and PLL is on a 60Ktpy (TLP + CLP) LiOH trajectory on that aspect. What happens in Quebec is "undecided". But it was "hinted" at PDAC that Hydroxide in Quebec was PLL's shall we say "ambition". Not there today.