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Perth-based Lithium Australia NL (ASX: LIT), engaged in the business of extracting, acquiring, recovering and developing lithium deposits,has updated the market that the Company and its subsidiaries have implemented safety measures to curb the spread of COVID-19 with all the Group employees working from home. At the same time, the Group is also ensuring that employees who have continued to work in the office premises are practising strict social distancing and hygiene standards.
The Company is closely monitoring the Australian federal and state governments’ announcements regarding different support programmes being rolled out so as to apply for any of these to benefit the Group employees. The application for the JobKeeper programme has been lodged and should the Company qualify for the same, a minimum payment of $1,500 per fortnight would be given to the eligible employees.
Over the next 6 months,the Group is expected to qualify for up to $ 0.3 million in PAYG subsidies and additionally, it has been exempted from Western Australian state payroll tax for the period March -June 2020.
COVID-19 – Impact On The Business And Financial Markets
The service providers related to the Group business and other stakeholders have curtailed operations, as the Group on the whole has delayed the commencement of new projects and pausing most research initiatives.
Lithium Australia also highlighted that the ongoing health and economic crisis has deflated stock exchanges, which has consequently caused a lack of investor confidence leading to difficulties in raising equity at the prices required to operate at levels seen in the past.
Nevertheless, the Group is presently giving importance to the business components that have the potential to deliver short term revenue and simultaneously all technology development and exploration expenses have been postponed for the two units being Chemicals and Raw Materials.
Lithium Australia’s cash in hand stands at $ 3.3 million as at 31 March 2020, which implies that it is funded for at least the going calendar year based on current assumptions. Very recently, the Company completed the LITCE call which had Lithium Australia raise around $0.310 millionwith an auction of LITCE forfeited shares to be completed.
- Envirostream Australia Pty Ltd – Battery Recycling
Recently on 27 March 2020, Lithium Australia’s 100%-owned subsidiary Envirostream Australia Pty Ltd made the second shipment of mixed metal dust (MMD), comprising energy-active materials recovered from lithium-ion batteries (LIBs), produced at its recycling facility in Melbourne after an extended period of commissioning and plant optimisation.
The facility is now operating at the planned capacity and double shifts, 16 hours per day, five days a week and continues to do so. As at 31 March 2020, there were more than 110 tonnes of LIBs in stock and the Group plans to continue working in double shifts until the depletion of this stock.
A copper-and-aluminium (Cu/Al) separation circuit is also under commissioning. The process is expected to take a few weeks and Envirostreamwould earn revenue from the sale of 178 tonnes of mixed Cu/Al stockrecovered from LIBs.
As the Battery Stewardship Council in Australia introduces a nation-wide battery stewardship system from 1 July 2020, the volume of batteries Envirostream (the only LIB recycler in Australia) receives is also expected to go up by a large number.
The Group’s Board has delayed Envirostream’s planned float, on back of the extensive market volatility. The Company continues to focus on enhancing battery collection and reducing inventory levels to meet the revenue and cashflow needs.
- Soluna Australia Pty Ltd – Battery Business
Lithium Australia had signed an agreement with China-based battery manufacturer,DLG Battery Co., in December 2019 quarter to commercialise VSPC Ltd cathode powders and develop a battery distribution business within Australia. During this period, Soluna Australia Pty Ltd had also taken delivery of energy storage products in Australia. Both of Soluna’s employees being Mr Kieron D’Arcy (general manager) and Ms Raegan Hanks (sales manager), have worked through a decade in the renewable energy sector and developed relationships and sourced orders. The first sales for Soluna are expected to go out this quarter, and a positive cashflow is also anticipated by the next quarter following low costs and overheads.
- Employee Cost Reductions
Instead of entirely disrupting operations, Lithium Australia has decided to operate via a combination of less working hours, leave entitlements and salary sacrifice in the form of Company shares to make sure that most of the staff stays employed. The Board members have also agreed to receive half their remunerationin the form of Company shares for the following 6 months, to aid the Company in pressing times.
- Office Cost Reductions
To further bring down costs, Lithium Australia has also moved both its office and factory spaces, including the Company head office and those of its subsidiaries. The benefits of this decision are expected to be realised from April 2020 onward.
- Reduced exploration expenditure
Only the most indispensable exploration activities are being prioritised by the company while abiding by government-imposed regarding social distancing. The Association of Mining and Exploration Companiesis currently lobbying state governments in Western Australia to lower tenement holding costs and commitments and the proposal is under review. Lithium Australia, as a member of this association, would benefit from the same.
Stock Information: LithiumAustralia’smarket cap stands at around $ 23.37 million with ~ 584.27 million shares outstanding. On 3 April 2020, the LIT stock settled the day’s trade at $ 0.039 with ~ 1.08 million shares traded.
