Chris Berry tweeted "The capital intensity on the $SQM lithium expansion is incredible. What was that I was saying about the oligopoly getting stronger?"
I agree - it looks incredible.
Some context-
The SQM/LAC team at Cauchari are spending 425mUSD to produce 25 ktpa = 17,000 USD/tpa
ORE Olaroz phase 2 is to cost 285 mUSD for 25 ktpa = 11,400 USD/tpa
And the SQM Atacama expansion is to come in at <4,000 USD/tpa.
So what are the SQM team doing that makes Atacama so much cheaper than Cauchari? I reckon I would be asking that if I was invested in LAC...
This comment from SQMs announcement is intriguing. "Given the strong demand, we will work to increase our total capacity from 48,000MT to 180,000 MT in the next three years, investing a total of US$525 million in Chile, mainly in chemical plants in Antofagasta"
It sounds like they are not throwing very much in to pond expansion in which case the numbers may be reasonable - I can understand the reluctance to put money in to ponds at Atacama given they most likely have to hand that to the government in 2030. However, it seems unlikely that they could triple their output with the existing pond area unless they are planning on doing something very different with the process.
Never say never, but I am sceptical on both the time and investment required to more than triple their output. An announcement like this will certainly make it harder for unfunded juniors to get their funding - perhaps there could be a little smoke and mirrors in this announcement.
GXY Price at posting:
$3.00 Sentiment: None Disclosure: Held
