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To: LoneClone who wrote (140528)	3/6/2020 3:10:01 PM
From: LoneClone	Read Replies (1) \| Respond to of 193231

Lithium: SQM, Ganfeng and Tianqi FY2019 results hit by lower pricing, asset write-downs roskill.com Posted 6th March 2020 in ?Industry news. By Robert Baylis Three of the “big 5” lithium producers reported Q4 and full year results this past week, with mixed revenue but significantly lower profits as a fall in product prices hit their top and bottom lines. This follows a similar picture reported by Albemarle and Livent in February. Ganfeng was the best performer revenue-wise, with income rising 5.6% to US$764M, making it the second largest producer by revenue behind Albemarle, but profit sank by 65% to US$70M. SQM’s lithium division revenue fell by 31% to US$506M and profit 52% to US$218.4M, while Tianqi’s revenue fell 22.5% to US$700M and profit fell 228%, resulting in a loss of US$403M (Note: Tianqi’s revenue includes 100% of Talison sales from which, 49% of Talison’s profit is apportioned to Albemarle). Tianqi took on debt of US$3.5Bn in Q4 2018 to purchase its non-controlling stake in SQM and reported interest of US$241M on this debt in 2019. As a result of a declining share price, Tianqi reported a provision for impairment of US$319M on the value of its SQM holding which, combined with lower concentrate sales and refined product prices, resulted in the significant loss verses its competitors. Ganfeng also reported a write-down of its assets in its full year report. SQM sold a similar volume of lithium carbonate and hydroxide in 2019 to 2018, at 45.1kt, and projected that sales would reach 55-60kt in 2020 with European EV sales underpinning 2020 lithium market demand growth. Production is expected to rise to 70kt in 2020, with SQM predicting stronger demand growth in the early-2020s requiring a larger comfort blanket. More interestingly, SQM plans to increase sales to China to 40% of its 2020 volume, a market which saw the lowest prices for SQM products in 2019. With China expected to experience headwinds from the Coronavirus and lower EV sales in 2020 dampening domestic demand growth, this volume boost could weigh further on domestic brine and converter output, also having an indirect impact on Australian spodumene demand. SQM is effectively using its first quartile C1 carbonate production cost to boost market share in China. Lower priced sales to China will also offset expected higher-priced sales ex-China, decreasing SQM’s royalty (see chart below which shows an incremental reduction in royalty costs as prices move lower). Although Tianqi hasno say in SQM’s lithium strategy, SQM’s actions may well improve both its Tianqi’s positions longer-term but,short of any significant upward price movement, this won’t help Tianqi’s current debt-laden balance sheet that has seen its credit rating cut to B2—or high risk—by Moody’s. What Tianqi does next is being monitored closely by Roskill. Roskill’s Lithium Market Outlook to 2028 report was published in July 2019 and is refreshed with regular updates. To download a brochure and sample pages for the report, or to access further information click here. Roskill’s Lithium cost model service provides an in-depth analysis of the lithium supply chain, from the discovery of new mineral resources through to the production of battery grade material. This analysis is critical in the evaluation of new lithium supply, as well as in accessing the security of supply from existing sources. For more details click here. Contact the author This article was written by Robert Baylis. Please get in touch below if you wish to discuss further: Contact the author