No of course not but some might think that after today’s SP performance. A nice little rinse out.
Lithium stocks continues to get hammered across the board, at least on the ASX.
It’s been the case all year, the hype train went straight over a cliff since January.
We continue to see overly bullish calls in an unloved lithium space, on HC mainly.
AVZ took the biscuit with PLS and AJM a distant second and third.
Speaking of PLS and AJM, they are anywhere from 4-6 months behind us.
I have made some optimistic calls previously but have toned right back the last few months given where the lithium market is currently at. Most calls on most lithium stocks are still blue sky with expectations of SP’s running with reserve/resource upgrades, first production, first shipment etc. Let’s be clear the market does not care about that right now. I can only see the hype coming back again when western car manufacturers actually start producing EVs in a meaningful way instead of just talking about it to throw the attention off of there diesel scandals. I’m hoping Tesla will force there hand in this regard with the Model 3 already outselling the BMW 3 series, Merc C class and Audi A4 in America and production is still way off full ramp up.
IMO the needle won’t start moving for any of the main lithium plays now until these progressively get ticked off, the time to talk is over now it’s time for them all to perform;
1. Prove they can produce a quality product
2. Prove they can produce it consistently
3. Prove they can produce it profitably with growing bank balance
4. Prove they can optimise process + lower costs after initial profitability
5. Implement expansion plans
I’d recommend looking into some gold plays as comparisons regarding profits/MC but Gold is a different investment proposition with a much wider investment base, still a lot of people and funds that wouldn’t touch lithium because it’s too risky whereas gold has been around for centuries.
There are a wide range of gold producers producing at different price points $700 and above USD per ounce. Latest guidance from CG is TAW costs of $350Us p/t base case for expansion. That leaves $550 p/t for TAW which lined up similar to some Gold players. Depending on how many tpa you expect TaW to produce going forward, the LOM expectations and some adjustments for location risk there are some goldies that can come fairly close p/oz productions as to where TAW could be by start of 19 or 2020. Again you need to factor whether you see the spodumene price dropping or not and whatever other factors you deem relevant.
Looking at our mate Bob Vassie at SBM;
Prod; 365-385k oz FY 18 estimated
Margin; $US 593 oz margin,
Debt : None
Cash; $215
LOM: Approx 10 years across both assets
Upside; Yes
MC; $2.5B
Location: WA + PNG
Capex: $100M
Looking at AMAL/TAW, early 2020;
Prod; 400ktpa - 2.4mtpa + fines (I believe it will be higher, some will claim lower)
Margin; $Us 500-600 pt (YMMV)
Debt; None
Cash; $50-100m
LOM; 10 years++
Upside; Yes
MC; $400m currently
Location; WA
Capex; $50M
Hell of a lot of work to Be done to be considered comparable to SBM, a superbly well run company but a comparison nonetheless. I was in for a nibble today at 39c, can never get the low like so many HC posters. Canaccord biggest buyers this and last month, GLTAH AIMO