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Mining
ASX-listed miners have approved more than 750,000t of new spodumene production capacity set to come online within the next two years in under 24 hours.
The rush to add supply to the market comes amid a record price run driven by extreme demand levels from Asian converters, who are in turn under pressure to supply lithium chemicals to the fast growing electric vehicle and stationary energy storage industries.
It also follows a month of heavy selling across lithium stocks after investment banks led by Goldman Sachs warned the market would tip into oversupply in the coming years.
It is a sore point for the sector after a dramatic pullback in prices in 2018 cut the nascent industry off at its knees, a situation that arguably led to the underinvestment in new supply that has stoked extraordinary price rises in 2021 and 2022.
Spodumene is trading at a midrange of US$6625/t according to price reporters Fastmarkets, but most producers of downstream chemicals are still raking in the coin for their products, selling at around US$75,000/t.
In short order the last 24 hours has seen:
Liontown’s decision to build the Kathleen Valley mine in WA’s northern Goldfields came despite a big increase in upfront capital costs for the mine from $473 million in its feasibility study to $545m, a nod to both optimisation and expansion of its feed scope and general inflation across the minesite construction business.
But it will be funded with the help of the famous Ford Motor Company.
The brand of the Model-T and sponsor of the Geelong Cats has demonstrated the desperation of auto giants to get their hands on lithium supply.
Not only will it join Tesla and LG among Liontown’s spodumene customers, taking up to 150,000tpa by the final three years of a five-year deal, but a subsidiary will also stump up $300 million in a funding facility which will help bankroll the project alongside a $463 million capital raise completed last year.
Ford finance is not just for hatchbacks it seems.
“The signing of our third and final foundational offtake agreement is a momentous milestone for Liontown and the Kathleen Valley project, with approximately 90% of Kathleen Valley’s start-up capacity now under secured long-term binding offtake agreements,” said Liontown’s managing director and CEO Tony Ottaviano.
“Our disciplined approach to our offtake strategy has enabled us to build a customer base of Tier-1, globally significant customers in
the EV battery supply chain, validating Kathleen Valley’s status as a globally relevant lithium asset.”
Ford VP of EV industrialisation Lisa Drake said the US car giant plans to deliver more than 2 million EVs on its own by 2026. The EV market globally sold around 6.6 million units in 2021.
“This is one of several agreements we’re working on to help us secure raw materials to support our plan to deliver EVs for customers around the world and meet our environmental, social and governance commitments,” she said.
Pilbara Minerals is raking in the dough right now at its Pilgangoora mine, with a stronger performance in the June quarter highlighting the cash cow nature of the massive lithium mine at current prices.
PLS expects to add some $565 million to its swelling bank account by tomorrow’s month end, taking its overall cash position from $284.9m last quarter to $850-855m.
That was driven by a massive 54% increase in lithium production from 81,431dmt to 123-127,000dmt.
Shipments are expected to rise 118% to 127-132,000dmt, putting PLS on track to hit a production rate of 373-377,000t for the financial year with sales of 355-360,000t, 26% higher than the 281,440dmt shipped in FY21.
Pilbara Minerals already expects to increase its nameplate capacity to 540,000-580,000dmt per year with the addition of the Ngungaju plant, formerly part of the old Altura Mining Pilgangoora operations.
But it has approved a $297.5m expansion to its Pilgan plant to take its production rate to 640,000-680,000tpa by the end of 2023, with $50m of pre-investment capital also to go towards preparing for future expansions up to 1Mtpa.
If it was able to grow to that level the mine would be challenging the Greenbushes mine in WA’s south for scale, the largest hard rock lithium mine in the world.
It also comes with PLS and South Korea’s POSCO working to develop a downstream processing facility in the east Asian nation, which will be fed by the company’s Pilbara product.
“Following the board’s Final Investment Decision, we are now able to commence construction of the P680 project in the coming months and expect commissioning of the primary rejection facility during the second half of next year with the crushing and ore sorting facility to follow shortly thereafter,” PLS CEO Dale Henderson said.
“This increase in production capacity will enable the company to continue to capitalise on the opportunities in the lithium chemicals market, being driven by rapid transition to decarbonisation through technologies such as electric vehicles and battery storage.”
An FID for the expansion to 1Mtpa is due in December.
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