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Mining
Lithium prices have been on a remarkable path in 2021, rising more than 300% from the depths of despair to all time record highs in response to an electric vehicle sector booming faster than anyone has predicted.
While the crash of 2018 and 2019 forced supply out of the market, spodumene prices have spiked, setting the scene for the restart of operations mothballed in the crash.
The largest of those was Wodgina, which 60-40 owners American lithium major Albemarle and ASX-listed iron ore, lithium and mining services giant Minerals Resources (ASX:MIN) announced today would restart from the September quarter next year.
The 750,000tpa mine in the Pilbara, one of the world’s largest, was shut in November 2019 in response to collapsing lithium chemical and spodumene prices.
It was incredibly bad timing for Albermarle, which closed a US$1.3 billion deal to buy its stake in the mine just one week before the decision to turn the lights off was made.
But the lithium industry has rebounded quicker than anyone would have thought, with lithium producers among the top performing ASX-listed stocks this year.
Underpinning MinRes and Albemarle’s decision to refire the Wodgina mine is an astonishing move in prices for both hard rock spodumene concentrate and battery chemical lithium hydroxide and lithium carbonate.
Price reporters Benchmark Mineral Intelligence said in their mid October report prices for battery grade lithium carbonate were up 322.5% year to date to US$28,675/t, with technical grade carbonate up 372.6% to US$28.375/t.
Lithium hydroxide prices are 252.7% higher at US$28,400/t, with a hockey stick shaped recovery seeing prices rise in the order of 16% a fortnight.
Spodumene prices have been similarly bullish. Fellow Pilbara producer Pilbara Minerals (ASX:PLS) recently sold an 8000t shipment of sub-6% spodumene for US$2240/t in an online auction on its Battery Materials Exchange platform.
Meanwhile Orocobre (ASX:ORE) reported last week its pricing will more than double for spodumene from the Mt Cattlin lithium mine in WA from US$779/t to $US1650/t.
MinRes boss Chris Ellison said the decision to shut Wodgina in 2019 was the right one, but that the company never doubted the long-term fundamentals supporting the lithium market.
“It was the correct decision in late 2019 to place Wodgina on care and maintenance though it never dented our confidence in lithium’s long-term positive demand fundamentals,” he said.
“As we said at the time and repeat today, in Albemarle we have the best partner to deliver maximum and sustainable value from world-class assets like Wodgina.”
“Lithium is one of MRL’s two core commodities, alongside iron ore, and we have worked very hard over the past five years to establish long life operations for both.”
All that said the joint venture partners are still exercising some caution, with only one of the three 250,000tpa production trains to open initially, creating 200 full time jobs.
“When market demand is sufficient, additional processing lines may be recommenced,” MinRes said in a statement to the ASX.
The deal also handed MinRes a 40% stake in the new Kemerton lithium hydroxide facility being built by Albemarle in WA’s South West.
“Wodgina, along with our 50%-owned Mt Marion Lithium Project in WA’s Goldfields and the soon-to-be-completed 40%-owned Kemerton Hydroxide Facility, give MRL a world-class portfolio of highest-quality, long-life lithium assets in a Tier 1 mining jurisdiction,” Ellison said.
It is one of at least three facilities in Australia being built to capture the downstream premium on offer for lithium chemicals, which are more than 10 times as valuable as spodumene.
China’s Tianqi and ASX-listed IGO (ASX:IGO), who own half of the Greenbushes Lithium Mine in WA with Albemarle, produced Australia’s first lithium hydroxide from their plant in Kwinana in August.
They plan to ramp up through 2022 while Wesfarmers (ASX:WES) has also approved the construction of their own Kwinana factory with its Mt Holland Lithium Mine JV partner, Chile’s SQM.
Pilbara Minerals, which recently began a major expansion of its Pilgangoora lithium operations by starting commissioning of a second processing plant, also appears to be looking downstream.
It announced a trading halt this morning “pending an announcement regarding the Company entering into a strategic transaction concerning a downstream joint venture”.
Pilbara revealed plans to establish a downstream processing joint venture with South Korea’s POSCO in 2019 before the downturn in the lithium market really began to bite.
Speaking at a conference this month, Pilbara Minerals’ Ken Brinsden said the incentives on offer in South Korea far outweighed those in Australia.
“We’ve had a look at what South Korea provides for the purposes of building chemical facilities over there and it is incredible,” he said at the Boom in a Room Conference in Perth.”
“There is no way you’re going to get that deal in Australia no matter which state you’re in.”
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