‘Another material step up’: Pilbara Minerals boss Ken Brinsden reckons spod can put on 50pc in the June quarter
Lithium player Pilbara Minerals released its March quarterly yesterday, fresh off the back of achieving a record price for its latest Battery Materials Exchange (BMX) auction of US$5,650/dry metric tonne (dmt).
That more than doubles the $US2,350/t fetched in the previous auction held last October.
For context, the average price for SC6% cargoes in late 2020 was just ~$US380/t.
While the super high price can be partially attributed to the relatively unique and competitive form of sale (open auction), it also verified what has long been suspected – there is not enough lithium being produced to meet current demand.
And outgoing PLS boss Ken Brinsden says that with an accelerating price and strong demand there’s going to be a “material step up in price received” for the June quarter.
“I’m sure that if we could produce more spodumene we would easily be selling more spodumene for a very healthy price,” he said in an earnings call yesterday.
“We haven’t been definitive about our expectations around price received during the June quarter, but broadly speaking, there is going to be another material step up in price received.”
The average spodumene price reference for sales in the March Quarter was US$2,650/dmt – and Brinsden flagged that the SC6% price could easily hit $4,000/tonne+ in the June quarter.
And he’s not alone in that option, S&P Global Commodity Insights flagged relatively high spodumene prices could keep lithium chemical prices buoyant into the second half of 2022 with pent up demand due to Shanghai’s lockdowns.
Brinsden said the auction results indicate just how strong demand is – and how short the market is, with PLS receiving around 50 enquiries about participating in its BMX auctions.
“The bidding itself is aggressive,” he said.
“And I can tell you that almost universally, participation and active bidding is represented by end users.
“So, it clearly shows that there is a key issue in the market in the sense that there is not enough raw material supply, because it’s the end users that are bidding up the price, not traders.
“That demonstrates how successful the BMX platform is and hopefully can be over time as we continue to grow production from Pilgangoora and start to place more product on the platform.”
FOB $5,650/dmt price for 5,000dmt of 5.5% Li20 spodumene achieved in @PilbaraMinerals fourth auction indicates a severe lack of #lithium feedstock availability for non-integrated Chinese converters. For more context on how wider SC6 pricing stacks up, subscribe to @benchmarkmin
— George Miller (@georgemillerBMI) April 27, 2022
Brinsden also said that historical norms are being broken down in respect to the market structure – and that miners are going to win more of the margin into the future because it’s likely that there will continue to be lithium raw material supply shortages.
“Margin that might have been available downstream is going to be passed upstream,” he said.
“Now I don’t have a crystal ball, I don’t know what the price is going to be – but I can assure you it is going to be materially higher than historical norms.”
When thinking about how much new lithium raw material supply has to come to the market, Brinsden said it’s going to build out the right-hand side of the cost curve.
“The combination of novel lithium sources and projects that are either lesser grade, or in more difficult jurisdictions, subject to transport limitations, all those things mean that the cost curve is going to be built out on the right-hand side,” he said.
“And what that means is you should not rely on historical norms when you think about future price.
“I think Pilbara minerals is incredibly well placed because we’ve got flexibility with respect to our sales platforms and our participation in the market.
“We’ve got a project, it’s very, very large in scale and in the right jurisdiction, and the right proximity to key ports.
He even called Pilgangoora the “Yandicoogina” of the lithium industry (for reference Yandicoogina is Rio Tinto’s biggest iron ore asset).
The company expects to achieve full commissioning and ramp up of Ngungaju Plant [old Altura operation] from the September Quarter, at which point targeted annual production capacity is expected to be between 180-200ktpa of spodumene concentrate.
And once Ngungaju ramps up and more uncommitted tonnes become available, PLS expects to hold auctions on a more regular basis.
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A total of 44 stocks were in the green, with 22 flatlining and 52 in the red.
The company has discovered a new lithium prospect at its Tambourah project in the Pilbara.
“The exploration focus on the North-West of the Tambourah Project, which covers just 4% of the Tambourah tenement, has continued to reward Riversgold with the identification of a third prospect with visible lithium mineralisation, seen in pegmatite swarms to the south of our Ragdoll Prospect,” CEO Julian Ford said.
“Our mapping, together with the interpretation of the newly acquired geophysical data, will allows us to start prioritising drill targets in the northwest of the tenement.
“With multiple lithium LCT Pegmatite targets in the North-West zone, Riversgold’s priority will now switch to the drilling phase.”
The company says it will continue the systematic exploration of the remaining 96% of the Tambourah tenement to generate additional exploration targets.
Morella has flagged key targets at its Fish Lake Valley project and plans to kick off drilling in H2 2022.
The three initial targets are in the southern portion of the project, and the company says that additional drill targets may be identified once its is able to review and consider the outcomes of the ongoing geophysical exploration being conducted in the northern area of the project.
“Whilst we will continue our geophysical work over the remaining area of the project, the development of a drilling program and advancing towards drilling in the second half of this year will be the major focus for Morella at Fish Lake Valley,” CEO Alex Cheeseman said.
“Coming into the US summer the timing is excellent and we look forward to taking the next step forward with this project.”
CRR has found visual spodumene in the first hole of its Mavis lake drilling program in Canada – confirming its highly prospective drill targets.
The 7.63m of white to grey pegmatite mineralisation is estimated to contain approximately 25% of medium to large, white-grey, spodumene crystals.
“To encounter visual mineralisation in our first drill hole at Mavis Lake is extremely exciting,” MD Alex Biggs said.
“We feel that Mavis Lake has the potential to be a transformational asset for the Company and we are committed in our goal of defining a JORC compliant Resource.”
CRR is confident that Mavis Lake represents a transformational opportunity for the company to position itself in the lithium sector in Ontario – especially considering the Canadian Government’s recently announced C$3.8b critical minerals strategy to boost domestic production of lithium, Tesla recently opening a battery gear manufacturing plant in the region and Avalon Advanced Materials’ (TSX:AVL) plans to establish a lithium refinery in Thunder Bay.
The company has received firm commitments for a A$55 million, two-tranche placement which includes a US$10m (A$14m) strategic investment by major North American player Lithium Americas Corporation (NYSE:LAC).
LAC has a market cap of around US$3.4 billion and is currently constructing the Cauchari-Olaroz lithium brine project in Argentina as well as targeting development of its Thacker Pass deposit in Nevada.
The funds will be primarily directed towards aggressive exploration and advancement of GT1’s key lithium assets in Ontario, including completion of an integrated feasibility study for the Seymour lithium mine project.
Plus, the companies entered a non-binding Collaboration Framework to assess a strategically located, integrated lithium chemicals business in North America.
“GT1’s team brings a strong track record of lithium exploration and resource extraction, which fits well with Lithium Americas’ expertise in chemical processing,” LAC president and CEO Jon Evans said.
“With this initial investment, we look forward to working closely with GT1 to help accelerate the development of a North American lithium supply chain.”
Subject to GT1 shareholder approval, LAC is set to become a 5.2% shareholder in the company.
Existing major shareholders in the company, AMCI Australia Pty Limited (AMCI) and Primero Group Limited, committed for A$4.0 million and A$3.14 million respectively in the placement.