WR1 (ASX) WR1 General Discussion

Originally posted by triage: ↑

Thanks for the link but I sort of disagree with a couple of points made there. First up a brine operation is the equivalent of a spodumene and carbonate operation. Allkem produces carbonate at its brine operation in Argentina which is then shipped to Japan for conversion into hydroxide. Also brine does not always produce battery grade, again Allkem at its Olaroz brine facility produces a lot of lower grade technical grade product.

Having said that, the rule of thumb for brine versus hard rock is that brine has high capex low opex and hard rock has low capex high opex. When the lithium price crashed in 2018 / 19 it was hard rock miners, not the brine operators, that went broke. So I agree it is true that getting a brine operation up and running takes longer, is more expensive, is more challenging but once you have a brine facility running okay it is like money for old rope.

Another advantage of brine over hard rock is the amount of resources and life of mine. Allkem's Olaroz has enough known resources to keep going for a hundred years or so. In contrast a number of hard rock mines have expected life of mine of 10 years, maybe 20 years. Someone like Rio or the big oil and gas players likely don't want to stuff around with assets with a short life of mine but like the idea of an asset that can operate with very low operating costs for generations.

Also most of the operating brine assets are high in the Andes in Argentina which come with country risk and also chemistry risk. The political and economic challenges for Argentina are well known but the reality is that Argentina is relatively sound compared to the two other brine majors in Bolivia and Chile. Most of the brine operations are at high altitude, with Olaroz at about 3900 metres. This stuffs up the chemistry - for instance from memory water boils at 85 degrees celius there. Seems weird but that complicates everything - Allkem is toying with building an intermediate facility at lower altitude to improve the quality of its product.

Everyone keeps saying that Quebec is a tier one jurisdiction. I say the proof of the pudding is that both Critical Elements and Allkem have been trying to get their projects in Quebec permitted for over 5 years and neither are there yet. Thackery Pass in the US has been stuck in the court system for more than 6 years and even though it has moved into development there are still court cases pending. I think WA and Brazil are far less risky than either Argentina or Quebec. (as for much of Africa, it probably goes to who is willing to pay the most under the table that gets the assets and the permits but easy come easy go). Another factor with Quebec is that most hard rock prospects are very remote - don't argue with me about that as Chris Evans emphasised that point at the New World Metals event in Sydney he presented at.

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1. High capex low opex is not more favourable than the inverse. In your example sure, low opex is more robust to weather those macro climates but the same can be said when cost of capital is through the roof. It's very situational specific dictated by many factors (gearing, resource forecast, contracts etc)

2. Project life is very much down the list when it comes to any sort of portfolio rationalisation (i have first hand experience here). You just never want to bring forward liabilities, only push out.

3. I agree people overstate quebec's ease of permitting, but, australia (and WA) is definitely getting up there in soverign and environmental risk with a number of projects. Let's take the newly formed PRCP framework in QLD. It's a nightmare for new projects to adhere to this, and even existing projects are having to spend significantly more money over the next few years. Ultimately - with risk comes opportunity right? (in quebec's case for the future).

PRCP framework: https://environment.des.qld.gov.au/__data/assets/pdf_file/0026/95444/rs-gl-prc-plan.pdf

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1. High capex low opex is not more favourable than the inverse....

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