Lithium prices set to crash?

Lithium mining stocks took a hit on Goldman Sachs report/prediction that LCE prices would collapse in YE23 (to US$16k ton form US$54k ton). The rational is that supply / capacity is coming on fast and the market will go from deficit to over supply by end of YE23. Key to this assumption is a significant increase from China lepidolite (mica), a hardrock lithium resource different to traditional spodumene. This has about half the lithium concentration and thus has a higher cost to extract according to two studies**. ( https://researchrepository.murdoch.edu.au/id/eprint/63573/1/Mulwanda2021.pdf )

If I take the estimated LCE price the lepidolite based production would have around an 18% gross margin vs Brines and Spodumene of over 50%. Would that cover the cost of capital and provide a positive return? Perhaps not but not all Chinese companies are focused on profitability.

The other side of the equation is demand, the GS report has about a 20% lower total volume need by YE25 vs various other studies and reports. Food for thought.

In my view and in my estimates, I assume LCE price for SQM do not rise above the US$30k mark and fall to US$20k ton in YE23 fwd. This provides the US$180 price target. See report SQM Lithium King

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