Ground Breakers: Everyone wants a chunk of Pilbara Minerals' lithium expansion

Pilbara Minerals boss Dale Henderson says the company has dozens of options in an uber-competitive process to partner on a lithium refinery
Allkem gets green loan for Sal de Vida
Gold giant Newcrest disappoints in June quarter

Pilbara Minerals (ASX:PLS) boss Dale Henderson says more than 70 companies have thrown their hat in the ring to help develop a new lithium chemical plant from its Pilgangoora expansion.

It came as Pilbara Minerals continue to print cash in the June quarter, boosting its bank balance by 24% to $3.3 billion after selling 176,300t of spodumene in the fourth quarter, an increase of 22%.

PLS sold that cargo at US$3256/dmt on a 5.3% Li2O basis — a grade profile becoming more common at current prices due to the higher recoveries at that level — equivalent to US$3714/dmt on a 6% basis.

That was 33% down on the March quarter (US$4840/t) as prices trended down before stabilising.

Unit operating costs remained stable at $628/t in the fourth quarter, with CIF costs falling 15% to $976/t on lower royalty and shipping costs.

But the big focus for PLS is now its move downstream, as it ramps up spodumene output at Pilgangoora to 680,000tpa and then 1Mtpa by the middle of the decade.

The first train of a JV hydroxide processing plant with South Korea’s POSCO is 65% complete, while PLS has started a process to partner on a plant that will use 300,000t of unallocated spodumene concentrate from the 1Mtpa expansion of its Pilbara mine, enough to support “multiple hydroxide trains”.

MD Dale Henderson says interest in the partnering process shows how much the profile of the lithium market has changed in recent years.

“The first time we ran a process like this in 2017 you could count the participants on one hand, and ultimately what flowed from that process was a joint venture with POSCO,” he said.

“And fast forward to today, the long list is something more like 70-odd.

“But of course … we are shortlisting down to a much smaller number and progressing discussions but I mentioned that just to highlight the interest in the industry and how much the industry is rapidly evolving and growing.”

Beware of price shocks

The lithium market suffered an epic sell-off on Friday in the Northern Hemisphere and Monday across the ASX, apparently off the back of a sliding futures contract on the Guangzhou exchange in China.

According to Caixin Global and Bloomberg, the trade took lithium carbonate for January delivery on the Guangzhou exchange down 12.6% from US$34,260/t to under US$30,000/t.

It followed a short term hit in December on a similar fall in the Wuxi lithium carbonate contract, which did precede a slide in lithium chemical prices across the first four months of 2023.

But Henderson warned investors around taking small market price moves on face value.

“Speaking with a few of the commentators in the market in the last 24 hours, they note that the volumes are fairly thinly traded and what that means is volatility continues to play out,” he said.

“And with those thinly traded volumes and very few data points around the market, what happens is you typically in lithium get outsized responses.

“All I would say is I caution everyone that these types of data points whether it’s the Guangzhou exchange or the Wuxi exchange, we have seen in the past outsized responses to smart contracts and small volume movements and I encourage people to step back and look at the macro drivers because from our view they remained very strong.

“Specifically as it relates to our customers, demand remains strong, we have no issues moving our product, it flies out the gate. The question is what pricing and we have an abundance of offers and customers to sell product to.

“So given this noise that you hear around some of these market trades, just like to reassure you from our perspective, this is a great market.”

For the full year Pilbara produced and sold a record 620,100t and 607,500t of spodumene respectively, up 64% and 68%, with realised pricing up 87% from US$2382/t to US$4449/t, underpinning a 238% boost in revenue to $4 billion despite operating costs lifting 11% to $613/t (up 3% in US dollar terms to US$413/t).

Including freight and royalties those costs came in up 29% at $1091/oz or US$735/oz.

Pilbara Minerals (ASX:PLS) share price today:

Allkem secures finance for Sal de Vida

If you needed any more clues about the centrality of lithium to global investment plans, look no further than the World Bank’s International Finance Corporation, which has signed up to provide a US$130m facility for the development of Allkem’s Sal de Vida brine project in Argentina’s Catamarca Province.

The green loan will be supported by a separate US$50m loan from another lender and highlights the IFC’s perception of Allkem and Sal de Vida’s ESG credentials.

“We are proud to partner with IFC to ensure long-term safe and sustainable operations, responsible products, and thriving communities,” AKE MD Martin Perez de Solay said.

“We are committed to the highest sustainability standards for Sal de Vida so that it will contribute to the economy of Catamarca via local employment, the development of local supply chains, and community development programs.”

The ten year loan comes in the wake of Allkem’s announced merger with US-listed Livent, which will create the world’s third largest lithium producer.

Allkem already operates the Olaroz brine and Mt Cattlin spodumene mine in Argentina and WA, but is looking to expand by developing Sal de Vida and the James Bay lithium project in Canada.

Also incorporating Livent’s El Fenix project on the Hombre Muerto Salar, they expect to produce at a combined production rate of 250,000tpa by 2027.

Allkem (ASX:AKE) share price today:

Newcrest flops on guidance as Newmont deal approaches

Newcrest Mining’s (ASX:NCM) has since May told shareholders they should unanimously vote in favour of an all scrip bid from US gold giant Newmont.

The $32 billion merger will be the largest deal in Australian mining history, and looks even more premium in the wake of a big guidance miss from Australia’s largest gold producer this morning.

NCM produced 556,000oz of gold and 35,000t of copper in the June quarter, hitting the bottom end of its guidance range at 2.1Moz gold and (a below guidance) 133,149t copper for FY23.

That was achieved at a June quarter AISC of US$1196/oz and FY23 AISC of US$1094/oz for margins of US$706/oz and US$678/oz respectively.

Newcrest had full year guidance misses at Lihir, which at 670,013/oz significantly undershot its forecast 720-840,000oz target, and Telfer, which came in at 348,823oz and 16,665t copper, below the 355-405,000oz and 20,000t forecasts.

At 286,003oz, the Brucejack mine delivered slightly under its 300,000oz target, while Red Chris and Fruta Del Norte delivered more gold than expected.

Meanwhile, Newcrest says there will be no impact to production at Cadia from an environmental compliance notice from the NSW EPA, with the company looking to tap stockpiles while it reduces mining rates underground and brings additional dust filtration online.

A final independent report in the form of a human health risk assessment is due in September, something Newcrest says will provide “a comprehensive scientific picture on the overall air quality in the district, and importantly, the community’s health and wellbeing.”

RBC’s Alex Barkley said the fourth quarter was below expectations, with all in sustaining costs coming in 22% above the bank’s estimates and 15% above consensus.

“Another weak quarter at Lihir saw the site miss annual guidance again. Issues of mining flexibility paired with insufficient autoclave capacity impacted the site again. We maintain our operating concerns for Lihir in FY24, and see potential downside to market expectations,” he said.

“Environmental issues at Cadia continue, with the EPA enforcing a lower mining rate. NCM expect this to be resolved by Q2 FY24, and that processing some stockpiles should negate any production impact.

“Good Q4 grade gives us more confidence in FY24 production. However, we consider the multiple ongoing environmental issues a concern for the site in FY24 and beyond.”