The simple answer to your question is that not all 'battery grade' material is Tier 1 quality nor is Spodumene (DSO or SC6) created equal. This is part of the reason many producers are struggling to achieve their nameplate, quality and financial objectives IMO, as not all 'battery grade' material is up-to-scratch and therefore not able to attract premium / Tier 1 prices.
Often excessive and costly processing is required downstream, adding to the overall costs whilst attempting to produce quality hydroxide or carbonate. I cannot emphasise enough that Tier 1 'battery quality' materials are essential for producing Tier 1 quality batteries i.e. that are able to meet the higher standards of western OEMs.
The likes of Tesla, VW, Samsung, Panasonic and LG Chem are demanding Tier 1 quality for their long term future supply (as referenced below) and IMO the likes of CATL and BYD will be forced to 'up their game' and reach Tier 1 specification in order to meet unprecedented export demand and be able to maintain or grow their market share.
This is where I believe AVZ (along with Greenbushes) is in the box seat moving forward. AVZ's geos have known for sometime that Manono is an extraordinary deposit that can potentially deliver Tier 1 long term supply assurances via its high grade and low deleterious element nature - which can be mined on the cheap due to its low strip ratio and pegmatites being at or near surface.
The long awaited Transport study, 5mtpa SS, JORC update and Met tests I expect will confirm the likely major economic benefits of Manono (compared with ~90% of current producers) before the DFS lands the final blow and produces a definitive and relatively concrete equation that propels Manono into production by 2022-2023.
I would also opine that the current weakness in the Lithium market is actually a positive development for AVZ, as it is already discouraging further exploration for new and marginal projects, not to mention the delayed ramp-up of producing mines where net margins and the overall quality of product is causing concerns and being questioned. If stable to lower prices are maintained throughout 2019 -2020, then they are likely to materially weaken the balance sheets of marginal producers and cause further ramp-up delays, and I expect that some unsustainable projects may even be mothballed.
Therefore the above price weakness scenario throughout 2019 is likely to reinstate some balance in the supply/demand equilibrium for Lithium in general. And as supply chain bottlenecks are eased, 76 current megafactories and counting are rapidly brought online to cope with exponential EV and battery storage growth and demand for Tier 1 battery quality material substantially increases, then that is when we will see a price increase for Tier 1 quality product that is more reflective of the exponential growth curve for EVs that the world is beginning to witness (albeit still in its infancy).
Forecasted global EV sales using the Tony Seba's median s-curve as below.
So far the world is on track to achieve Tony's 'outlandish' forecast, although newly created supply-chain bottlenecks (due to greater than anticipated demand for EVs) are causing delays in the short term and may hinder the below growth projections over the next year or two. eg. based on Q1 2019 sell-outs, sales and limited range of EVs worldwide, I anticipate @2.7 - 3m EV sales for 2019 (though this still ahead of the vast majority of analysts' forecasts). https://evbite.com/porsche-taycan-mercedes-eqc-audi-e-tron-all-sold-out/
Thus I suspect that we will see a much greater total investment than already announced below, and note that these investments do not include the plethora of new EV startup companies (aside from Tesla) that will inevitably disrupt the majors and cause industry wide panic and consolidation.
Add another 4 Gigafactories to the below i.e. since this slide was produced late last year.
Finally, the recent news that China's 5G network requires as a massive 155GWh of Li-ion batteries for a 14.4m telco base station rollout has so far largely gone unnoticed by western media and analysts, and I'd suggest that the vast majority of these so-called 'experts' need to get with the program and substantially increase their future demand estimates for Lithium and other battery metals. 2000 GWh by 2023 anyone?
In the meantime, AVZ ers can look forward to some of the long awaited updates as follows:
1. Transport Study (by end of this week IMO)
2. 5mtpa Scoping Study (by end of this week IMO)
3. JORC update (by end of this week IMO)
4. Chairman - May/June?
5. Met Tests - updates from May (note: container with drill cores was due to arrive in Fremantle Port last Sunday April 28, thus expecting confirmation of arrival and possibly as part of one of the above impending announcements).
6. Research reports via brokers - initiating coverage on AVZ as the demand for Battery Grade Lithium becomes better understood by their analysts, creating several lightbulb moments.
7. 5 year tax holiday
8. 10% extra project interest
9. Carriere De L'este maiden JORC - next half
10. DFS - next half
11. Offtake Agreement/s - next half
12. Project Financing - next half
GLTA and please DYOR.
Cheers
Elpha
AVZ Price at posting:
4.0¢ Sentiment: Buy Disclosure: Held
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