i agree there is nothing new in the article. morgan stanley are playing the game.
output increases from sqm over the next 5 years have been overestimated by this article and other analyses, given that
1) the ramp up in production at sqm will take several years and is dependent on a number of variables (like phase 2 and 3 for ore but i would argue their target outputs are less certain
2) the chilean govt has approved an increase in the total cap over a 5 year period, but there are a number of subtle factors at play (total cap limited, mine life caps, very high royalties, capex, permits, technical expertise, market dynamics) as outlined in previous ore, pls, gxy and other threads which mean sqm is unlikely to increase production by more than around 60,000t per year out to 2025 (ballpark figure, exact is impossible to predict this far out).
the good news is that stories such as this will scare off the smaller players and will scare would be financiers who may potentially fund small lithium explorers. most lithium hopefuls will never get into production and these kinds of articles dont help them.
ore, on the other hand, has a few massive factors going for it that should not be forgotten in all the noise:
1) it is fully funded and permitted for phase 2 25,000t expansion, no finance is really required but if they want to use a 100m loan as suggested they should have no trouble securing this and this frees up capital for other growth avenues (lioh x2, cauchari, phase 3, etc)
2) they are ahead of the time curve, given phase 2 FID should occur within 6months and long lead time activities are underway already. time to market is everything for both expansions and new miners because its a race, those who come late will miss the spoils of the boom phase of the cycle and may never reach production at all.
3) they are at the lowest end of the cost curve, because at full capacity they will produce at around 2,500/t costs and so i laugh when i read a 45% spot price drop to 7,000usd/t because thats still a handsome gross profit margin >50-60% for ore. they are at a competitive advantage to sqm and alb in that ore will pay low royalties in argentina, compared to chile where swm and alb are getting robbed by the govt and this affects margins and thus expansion decisions.
4) lioh plants give them even better margins, improving the buffer against lower spot prices.
for all these reasons im very happy that ore is amongst my largest holdings at around 7-8% of my portfolio and im not tempted to sell any even though im up around 140% over 12mo. ok sure the sp is volatile and might drop to 5.00 next month, but it will more likely be close to 10.00 in 1/2 years.
Expand
