My view is Tawana Resources have timed their entry into the Lithium market very advantageously; at a time when shortages have pushed the prices up to record highs. This shows with the off take signed with Burwill for US$880/t for 6% product with a large prepayment. This is impressive given Tawana is a relatively small company with low credibility relative to the bigger capped companies and hence have less bargaining power. Management has also worked quickly to move the company into production at Bald Hill and I expect to see some upward SP movements once closer to commissioning and shipping. These are definitely big positives in terms of generating shareholder value in the short term.
However, the Maiden Resource released today, in my opinion is fairly average in terms of both grade and resource. I would like to see more drilling results soon if they can expand their resource to cover adjacent tenements and establish a resource more in line with the 30mt exploration target while maintaining current Li20 percentages.
I would also like to see management provide a plan to reduce the production costs from high A$400s to low A$400 in the future (based on estimates in the Canaccord research report). I see this as important since the contract with Burwill extends till 2022/23 so reducing costs can protect profit from any future downturns in the lithium market. I see this as important as it is often easy to overlook future risks when things are going well in the present.
A minor thing to keep an eye out on is the financial health of Burwill. I understand it does not have the strongest balance sheet according to it's financial disclosures to the HKSE and the prepayment to TAW was almost fully funded with an issue of 7% debt. Nothing serious at this stage but the financial credibility of many Asian off take parties was an issue discussed at the recent Lithium conference so I'd thought i'd bring that up.
I'm sure there are many more positives/negatives I have not covered here but these are just a few I've pulled off the top of my head.
