Monsters of Rock: IGO’s new lithium mine gets some numbers as base metal prices weigh on miners
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The early 2023 run in base metal prices has come to a stall, with nickel, copper, zinc and aluminium all sagging.
Copper prices have ridden on the coat tails of optimism about the reopening of the Chinese economy post-Covid.
But they fell overnight in an apparent delayed concussion from Friday’s strong US jobs report, which has lifted concerns of more Stateside interest rate rises.
“Copper led the base metals sector lower as the impact of the strong US jobs report last week lingered. The prospect of more rate hikes by the Fed saw US bonds tank, with US Treasury yields climbing. A weaker USD also weighed on sentiment,” ANZ’s John Bromhead said in a note today.
“The gold price steadied after last week’s sharp selloff after the jobs report. Rising geopolitical risks boosted safe haven buying. US-China tension rose after the US shot down a Chinese technical balloon over US territory,” he also noted.
Copper fell 1.2% to US$8872/t, having risen over 10% to more than US$9000/t last month.
Gold fell 0.6% to US$1867.81/oz, while nickel, fetching upwards of US$30,000/t at the end of January, dropped 4.7% to US$27,258/t.
Nickel prices remain volatile with low liquidity on the main trading exchange, the LME after concerns about a short squeeze last year.
On the other hand front month Newcastle coal prices enjoyed an almost 7% lift above US$250/t.
Elsewhere materials had an ordinary day, falling 0.23% and joining the afternoon plunge after the RBA lifted interest rates for a ninth straight time by 25bps.
Newcrest Mining (ASX:NCM) meanwhile rose 1.71%, its second day of gains since it was revealed American gold giant Newmont had made an indicative offer to trade shares to buyout the Australian gold major in a $24.5b deal.
Essential Metals (ASX:ESS) has delivered a scoping study on its Pioneer Dome lithium project, warming up IGO (ASX:IGO) and its JV partner Tianqi ahead of their $136 million cash takeover of the lithium junior.
The deal will add a second lithium front for the part owners of the Greenbushes lithium mine as well as a lithium hydroxide plant in Kwinana which will ramp up to between 60-70% of its 24,000tpa capacity by the end of the year.
In scoping level work by lithium engineering experts Primero Group, Essential has put a $293m price on developing the Pioneer Dome mine, with a $36m contingency, producing 193,745t of 5.7% Li2O spodumene concentrate a year at average life of mine cash costs of $1030/t.
The mine would boast an NPV of between $275-458m, with a base case of $367m, base case internal rate of return of 40% and payback period of 1.7 years against a 7.3 year mine life extracting 8.8Mt of ore at 1.11% Li2O.
ESS assumes construction and investment commencing in July 2024 with first production in January 2026.
“The robust Scoping Study results support more detailed studies being undertaken to determine the optimal development pathway to developing a lithium mining operation in Western Australia whilst taking advantage of expected strong demand for lithium concentrate, which should generate healthy margins,” ESS managing director Tim Spencer said.
The junior said the “positive results” of the scoping study supported the start of more detailed studies on the project near Norseman in WA, which contains a resource estimate of 11.2Mt at 1.16% Li2O for 129,000t Li.
But the company noted the imminent 50c cash per share scheme by IGO and Tianqi’s 49-51 JV Tianqi Lithium Energy Australia.
The deal is expected to close in May.