Diggers and Dealers Day 2: Lithium supply shortage is real, says Pilbara Minerals
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Pilbara Minerals, owner of the vast Pilgangoora mine in the north of Western Australia, was one of the mid-tiers that survived and it’s now up almost ~500% in the past 12 months.
Proof in the pudding last week came from the sale of 10,000t of 5.5% Pilgangoora concentrate on its new Battery Metals Exchange platform for US$1250/t, around 3x the contract prices it was receiving 12 months ago.
According to MD Ken Brinsden, there’s even more to the positivity lithium miners are dealing in.
“Prior to this auction the maximum price referenced for spot was about US$900/t,” he told delegates at the Diggers and Dealers Mining Forum in Kalgoorlie today.
“Again, the icing on the cake is this product is a little bit like our discard, it’s 5.5%, the equivalent headline price achieved (for 6% product) is over US$1400/t.”
Brinsden said between late 2017 and September 2020 lithium chemical prices in China fell from around US$24,000/t to US$5500/t.
Now, he said prices were being driven up for spodumene for a number of reasons, including because chemical producers were under pressure from EV makers to deliver on their contractual commitments.
Brinsden also believes there is a real shortage of lithium feedstock in the supply chain.
“There is a genuine shortage, that I am certain about,” he said.
“The idea the chemical conversion industry is now stuck, they’ve built a lot of capacity without reference to the underlying raw materials supply base.
“As a result the miners are going to attract more margin, there’s just logic in it.
“When I think about telling you that story last year you would not have believed me, but actually we were starting to get a feel for that very event happening, it’s been building for some time.
“China has built too much conversion capacity for the available supply.”
Brinsden said PLS would be open to have other traders on the BMX platform because it provides transparency to the opaque and immature lithium spot market.
“The benefit you get then is greater transparency, what is the real price, and I appreciate that’s been very difficult to ascertain in the lithum raw materials world,” he said.
“We are advocates of greater transparency, that’s one of the reasons we built the platform, and we do like the idea there will be more industry participants over time.”
There are dad jokes and then there are actual jokes, and Mincor boss David Southam brought the latter.
One of two Kiwis presenting back-to-back before lunch with Bellevue Gold’s Steve Parsons, the Kambalda nickel project owner took aim at the “under-arm bowling Aussies” following him in Northern Star’s Stuart Tonkin and Pilbara Minerals’ Ken Brinsden.
He also cheered on the slimmer representation this year from Super Pit miner NST, whose multitude of executives post Saracen deal last year pushed Southam off the stage “like a Covid patient”.
Southam was cautiously optimistic on nickel prices, which have edged up in the direction of US$20,000/t in recent weeks.
But he was bullish on the rise of investment from battery makers in the local nickel industry, noting the material from Mincor’s new Cassini mine in Kambalda will be heading into BHP’s supply deal with Tesla.
Barrick Gold sold its Kundana operations and Kanowna Belle Gold Mine to Northern Star Resources for just $75 million.
Just the Kundana portion of that asset has been traded to Evolution by Northern Star for $400 million after 7 years of profitable operations.
It was a great bit of business, so new NST managing director Stuart Tonkin was always going to be asked whether the Super Pit owner with aspirations to be a 2Moz miner would be looking at more quality signings to bolster its front line.
“We are always looking and evaluating options, whether you’re buying ounces or finding ounces, we have a substantial CorpDev (corporate development) that reliably understands each of that,” Tonkin said.
“So the answer is yes, we always look at those things.
“But what we see immediately is phenomenal organic growth opportunities and value creators for us and you’ll see active portfolio management.”
He highlighted the sale of Kundana as a part of this process, calling it a “win-win” for both Evolution and Northern Star.
“We can focus our team and our effort into something like KCGM (the Super Pit), so the portfolio management means buying and selling, optimising and simplifying life, so it’s part of our DNA.”
Tonkin also addressed last year’s mini-conference that saw himself and former Northern Star bosses Bill Beament and Raleigh Finlayson all share the stage at the same time in 2020 (and shuffled Southam off the stage).
“Yes last year there were three of us on stage announcing Northern Star and Saracen,” he said.
“Whether it’s Darwin’s natural selection or a Steven Bradbury Olympic strategy, you have me here today alone.”
There has been plenty of positivity around copper as of late and that’s continued throughout the Diggers and Dealers conference.
Peel Mining owns a number of copper rich deposits around the Cobar region of New South Wales including Mallee Bull, one of Australia’s highest grade undeveloped copper deposits.
Despite the Covid situation in nearby Sydney, MD Rob Tyson said four drill rigs were still turning to expand the company’s growing resource inventory in the famous mining region.
He is bullish on the future of copper, one of the key metals for renewable energy infrastructure and EVs.
“We’re big believers in the copper theme and it seems to a very strong theme at this year’s Diggers around the electrification, decarbonisation of the global economy going forward,” Tyson said.
“It’s easy to get excited about copper, as well as nickel and other things obviously.”
“Copper is a very deep market, over 20Mt is used every year and simply put we haven’t been discovering enough to replace what we’re consuming and what we’re predicted to consume over the next decade.
“The price change we’ve seen recently we think that will be sustained and so we’re very happy to position the company to take advantage of that copper thematic.”