Linking to Li carbonate price is not a given now that we are also heading further into a Li hydroxide market for, for example 811 chemistry AND where spodumene can be converted directly to Li hydroxide there is no LiCarb pricing necessary.
PREMIUM versus ordinary.
AVZ is presenting a PREMIUM product to the market the likes of which ASX has not dealt with on the scale and duration AVZ manono can muster.
Things to bear in mind:
811 requires hydroxide.
Higher quality spod is in demand.
Spodumene can be And is delinked from carbonate price as this market transitions.
This is reflected in prices being relatively stable for spod versus carbonate prices. And hydroxide fairly stable and high due to shortages.
In short (doping does happen from hydroxide to 622 to complicate attribution) :
622 battery chemistry needs carbonate.
811 can not use carbonate unless converted to hydroxide...another cost.
So the assumed main ‘market’ precedent of LiCarb price linking to spodumene you hold onto is not a fundamental basis for forecast in this disruptive phase, by no means.
Can you see what’s emerging? AVZ can harness 900/t because it has the fundamentals for it and the market w/ birth pangs latching on into hydroxide market and, because AVZ with its advisor permanently in the Asian hub could and is reading the market correctly.
PLS might have some PREMIUM product but they are not separating in all likelihood—for instance PLS has 7 zonations with large amounts of over and underburden but nether the less it tries to globalise as one Resource on the page to investors.
Compared to AVZ Nigel who hasn’t been able to find a zonation in current drilling program, It’s tragicomic the PLS narrative of assuming a Resource when you look at all those zonations. (But gee they’re working hard on it and you have to commend them for that. (check lack of use of plural for resource in PLS Corp presentation)
I’m not saying PLS and others won’t turn or aren’t turning a profit but many of them. they have just damaged their margin by linking to the LiCarb price which is smashed down to 40% in one year and, these resources, clearly, aren’t of the caliber of AVZ resource by a long shot.
Having said all that have you compared Macquarie’s MIN and PLS forecasts for spod pricing? Lol they are a bit different, how is that? Different contracts?
AVZ has the PREMIUM product. It’s rare. Maybe I should just use name Greenbushes for that to register a bit better?
You say I’m deflecting but you changed the focus to LOM not just forecast assumptions.
As for LOM where is it etched in that there is a standard mechanism of some kind for forecasting price? You need conjunctions when talking price LiCarb-linked-spod price. The Li Carb price is down 30-40%. Spod and hydroxide pricing is more stable comparatively.
AVZ is saying we don’t need to do that linking because in China it’s actually not necessary, and because as we have a premium product that in all likelihood will be hoovered up by hydroxide plants if not for lithium metal (Li chloride) or simply speaking AVZ refuses to calculate in all the margin to the processors like some of the ones your defending are doing currently.
Basically that 600/t...can you post here dot pointed...anyway, where so it is because some operators could only manage that because of circumstances specific to their business operation, the pricing and is not an all-lithium product in the market given.
Now I’ll give you one example above with that “600” figure and you can argue with Chris Ellison and Macquarie:
I can’t cut and paste due to rules but for example you’ll have to check it yourself:
MIN via Macquarie is publishing basically 900/t all year in 2018 and are expecting a higher price this quarter, according to Macquarie in their latest called “Wodgina site tour” Have you seen it?
Ok, so that’s a recent precedent, MIN showing above 900 the rest is forecast assumptions showing 750/t to 2025. Bear in mind, AVZ has a much better product than MIN and to its ASX peers, a fact we can all agree on that but few openly admit. So that approx 900/t based on transition to hydroxide market dynamics and MIN example is already looking less problematic isn’t it?
Reference : Page 4 figure 8, MIN up to 2025 are seeing 750/t and that’s an inferior product, note no measured category, no indication I can see of metallurgy.
Macquarie note: 2018 Aug; PLS have forecast assumptions up to 2022 in the 800s and would that still be linked to the current Li Carb DOWN 40% in 360 days scenario?
I couldn’t see 600 anywhere. USD 834/t in 2022.
As for GXY check that yourself...
LOM $ therefore is a tricky business going forward if you’ve based your assumptions on certain precedents like the lithium carbonate pricing specific in some cases to an undisclosed contract detail and that is not relevant as much as it used to be because of market trends especially this year; Chemistry direction, other factors more macro like FX.
So where’s the scandal if EV demand is exponentialising along with other gadgets great and small?
Not in AVZ’s lap IMO. AVZ doesn’t have to follow the trend of companies who misread the market RE pricing & downstream end users...: 20 years is short given the book we are in. Manono will be crucial part of stabilising supply for Li battery sentiment.
These links below are a background to what I’ve averred above. It will indicate for you the problem of linking spodumene to Li carbonate pricing which is down 40% so that premium you insist AVZ publishes is arrogant only appears so because carbonate pricing has dropped in the last year.
Concept check: What if LiCarb price hadn’t have dropped the AVZ pricing would not stick out, and you would less likely have a bone of contention, yes? AVZ doesn’t need to conform to the error of Aussies in the market place, linking spod to Li Carb.
Above, It’s a good read. It shows also there are orders for 19 years in the hydroxide side of market, 19 years of consumption. A 20 LOM projection, with the certainty and consistency Manono has, premium spodumene, is just fine due to its premium qualities.
Consider the exponential curve for EV and other lithium battery products BNEF has forecasted. Having said that it’s just a projection, no doubt there’ll more than just spodumene lithium being produced before Manono’s 5th year potentially.
Now AVZ Manono is, a strategic in size and scale, that can easily say with a smile we can give you consistent grade for 19 years. 900/t might be cheap if you need supply surety to oust the gasoline vehicle market. The kind of companies that can forecast orders like that would be who? CATL, BYD?
Note here Ganfeng appears very cautious about ascertaining “product stability” it takes time. https://mp.weixin.qq.com/s/wO5O0sT6Gwjtg9Z_BOzTcg
So from the get-go at minesite, quality of product; how it’s processed appears to be crucial when read from Ganfeng Lithium expert’s outline. Reading about the time it takes to ascertain stability characteristics by Ganfeng’s expert, I see clearer how AVZ is receptive to industry participants needs and why AVZ is confident to publish so early indications of MET by Nagrom on manono spod? PREMIUM product characteristics emerging providing certainty on consistency and so stability??
Here’s a leading source (below) showing lithium concentrate in 2017 at 7000 yuan, FX factor 5, that gives about USD1200/t, not bad?
From those two articles, spodumene price clearly holds up stronger than Li Carb and a huge reason is, its not dependant on the 622 chemistry like carbonate has been.
At least we can see statistically as with Asian metals that Li Carb has suffered and so also those companies who assume as a golden rule that that’s the way it has to be even though we see a transition to hydroxide and the demand for premium product. Those two articles spell out what’s happening and what investors have missed.
Remember AVZ easily achieves 5.8% with simplest recovery.
The hydroxide market with the ramp up of EVs and the new chemistries using more lithium and a premium for exceptional product characteristics CONSISTENTLY available should keep fetching high prices for spodumene and Li hydroxide why not?
Last but not least for Dunny, because of this linking it seems the processors are hogging the margin with your supposed “orthodox” club of lithium authorities? Maybe this is part of the sector wide hangover? 2018 is a year of transition and 2019 as well perhaps.
Here is a reference to 7,000 yuan a ton for lithium concentrate 6% (spodumene) in 2017. = $1200 USD. Go figure.
AVZ should be seen as having apprehended the market dynamics of pricing with end users and the conversion factors and that a premium product is worth the extra bucks and at the same time, giving profit margin to processors by being stuck with a lithium carbonate pricing on the downtrend is not in shareholders best interest, is it?
Facts are spodumene doesn’t need to be necessarily linked to Lithium carbonate anymore!
There’s a market for converting spod to hydroxide for example and in any case a premium product-to-be like AVZ’s can command that realistic price that’s not a 50% premium its just realistic with its niche market.
-On the record, AVZ can achieve up to 6.8 (Belgians)
-Tin yet to be factored probably needs more MET analysis and logistics input to number punch
- 5 year tax ‘holiday’ w/ precedent to demonstrate its available.
-Also note, ASX would have wanted a full audit of this spod pricing AVZ published.
Despite all I have said some people will not like the realistic pricing at $920/t. As always AVZ just has to demonstrate through practice just like that JORC surprised...AVZ is setting benchmarks. Time to get use to it IMO IMO IMO
AVZ Price at posting:
7.6¢ Sentiment: Buy Disclosure: Held
