KDR has been heavily shorted recently. This has largely been successful (from a shorter's point of view) as KDR has largely been held by retail holders we have seen fear-based herd mentality selling behaviour. Whether it be "bots" or horse trading tricks - The transfer of shares to institutions and stronger hands is what we have seen in recent weeks.
BUT Shorters beware as the market wakes up to KDR being heavily oversold. I can't say I'll shed a tear for those shorting once the bounce kicks in.
KDR will be producing Lithium Hydroxide (LiOH) - Emerging as the preferred product for EV batteries over Lithium carbonate (LiO3).
Falling lithium price? Not all Lithiums are created equal
In contrast to lithium carbonate, The Lithium Hydroxide price has risen over several quarters. Current contract LiOH prices are ~US$16,000/t - SQM’s average contract lithium price for Q1 CY18 was US$16,400/t, up 21% on over US$13,500/t in Q4 CY17, on much stronger than expected demand. This accounts for all of SQM's procuct (bear in mind prices for battery grade LiOH would be higher).
Spot LiOH prices are still around $20000/t.
See graphic below from Piedmont's Lithium presentation 23 July 2018, McKinsey & Co.
View attachment 1221028
How the outlook has changed... It turns out LiOH is cheaper to make from Spodumene than brine. Brine still has to account for product impurities, upscaling delays and weather issues. Hard rock is looking increasingly attractive.
Earl Grey is the largest and highest grade undeveloped hard rock resource in the world with an incredibly low strip ratio - KDR will be a
FIRST QUARTILE COST LiOH producer.
The refinery is a massive game-changer and sets it apart from it's peers. Lets say a conservative $6000 AISC (well above the average cost). At $12500 per ton that's a 52%
margin ($6500/t on 22 kt KDR's 50% share). That brings KDR's risked and 10% discount value between $2.50 - $3.00 per share on conservative numbers (and that's
before the refinery upgrade which will likely double production).
KDR is fully funded to mine spodumene concentrate. It's in WA (best location in the world). It has the best partnership in SQM to get it done right. Oh - I always get reminded that it has rights to a nice bit of Gold alongside the lithium as well.
By all accounts the demand for offtake far exceeds what they can offer (KDR is prepared to offer 75% of production with offtake contracts to be announced). It's in a position other juniors could dream of.
$1.41 is laughable - Prices will not be here for long.
Shorters
beware - KDR is screaming BUY at this price.
