Summary of the 2025 China Materials Tour: Meeting with SMM Lithium Expert Industry Overview - **Industry**: Lithium - **Event**: 2025 China Materials Tour - **Date of Meeting**: November 17, 2025 - **Expert**: Mr. Zhou Zhicheng, Lithium Analyst at SMM Key Insights 1. **Lithium Supply and Demand Dynamics**: - Mr. Zhou forecasts that lithium supply will increase from 1.65-1.7 million tons in FY25 to 2.05 million tons in FY26, representing a year-over-year growth of 20.5% to 24% [2] - The market is expected to be largely balanced in FY26, assuming a 50% year-over-year increase in demand from energy storage systems (ESS) [2] 2. **Price Monitoring**: - A critical price level to monitor is Rmb100,000 per ton, as this is where marginal capacity is incentivized to come online when lithium average selling prices (ASP) stabilize between Rmb90,000 and Rmb100,000 per ton [1][8] - If prices remain above Rmb100,000 per ton, there is potential for prices to reach Rmb150,000 to Rmb200,000 per ton [8] 3. **Production Pipeline**: - The production pipeline is expected to remain flat month-over-month in December 2025, with a slight decline in the first quarter of 2026 [3] - Continued de-stocking momentum is anticipated in December 2025, with key indicators to watch in the second quarter of 2026 [3] 4. **Spodumene Inventory**: - Current spodumene inventory is estimated at approximately 80,000 to 90,000 tons LCE at smelters and 200,000 to 300,000 tons at ports, down from 1 million tons in mid-2025 [4] - Newly arrived spodumene cargo in November 2025 suggests an increase in spodumene-based carbonate OEM production for the remainder of the year [4] 5. **Processing Fees**: - Processing fees for different types of lithium carbonate are as follows: - Spod-based carbonate: ~Rmb18,000-20,000 per ton - Lepidolite-based carbonate: ~Rmb34,000-35,000 per ton - Brine-based carbonate: ~Rmb20,000-30,000 per ton - A downtrend in processing fees is expected in FY26 due to improving yield rates and energy efficiency, although the decline will be milder than in FY25 [5] Additional Considerations - The incremental supply in the next 1-2 years is primarily from brownfield projects, with few greenfield projects expected to come online soon [8] - The utilization rate of spodumene-based smelters is currently around 60% to 70% [4] This summary encapsulates the critical insights from the meeting with the lithium expert, highlighting the supply-demand dynamics, pricing strategies, production forecasts, and inventory levels within the lithium industry.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Lithium - **Current Outlook**: The company has shifted from a bearish stance over the past two years to a more optimistic view, calling for higher lithium prices due to supply disruptions in China and potential for further disruptions [2][22][34]. Price Forecasts - **Spodumene Prices**: - CY26: Increased by 32% to US$1,250/t - CY27: Increased by 10% to US$1,150/t - CY28: Increased by 23% to US$1,350/t - Current spot price is US$940/t [2][22]. - **Long-term Price Assumption**: Remains unchanged at US$1,200/t for spodumene [5][22]. Company-Specific Insights Pilbara Minerals (PLS) - **Financial Position**: - FY25 results showed no material changes, with a sector-leading balance sheet of A$599 million in net cash [3][12]. - **Production Guidance**: - Expected production of 880kt at A$590/t FOB, slightly above guidance of 820-870kt [3][12]. - **Future Projects**: - Ngangaju is expected to restart production in FY27, with an optimized DFS for Colina planned for June FY26 [3]. - **Earnings Upgrades**: - Significant EPS upgrades for FY26, FY27, and FY28, with EPS increasing by over 100% for FY26 [10][12]. - **Price Target**: Upgraded to A$2.30/share, a 44% increase from previous estimates [5][12]. IGO Limited (IGO) - **Dividend Outlook**: - Expected to return to healthy dividends in FY26 despite challenges in joint ventures [4][12]. - **Production Challenges**: - Facing write-downs and cash burn at Kwinana, with a disappointing outlook for Greenbushes [4][12]. - **Earnings Upgrades**: - EPS for FY26 increased by over 100% compared to previous estimates [10][12]. - **Price Target**: Upgraded to A$5.75/share, a 20% increase from previous estimates [5][12]. Market Dynamics - **Supply Disruptions**: - Anticipated continued disruptions in Chinese lithium supply, leading to further price increases [22][34]. - **Production Capacity**: - Greenbushes is positioned well for near-term production, with guidance of 1,500-1,650kt SC production at a cash cost of A$310-360/t [34]. - **Long-term Demand**: - Demand for battery materials remains strong, with a focus on electric vehicles (EVs) and battery energy storage systems (BESS) [26][34]. Conclusion - The lithium market is expected to experience price increases due to supply disruptions, with both Pilbara Minerals and IGO positioned to benefit from these changes. Upgrades in earnings forecasts and price targets reflect a more optimistic outlook for the sector moving forward.