Monsters of Rock: MinRes wants to expand lithium production as spodumene edges towards US$6000/t

MinRes shares soar after announcing major expansions of Wodgina and Mt Marion lithium JVs
Spodumene spot sales in the China market averaging US$5750/t: Fastmarkets
MinRes defied weakness infecting other major battery metals and rare earths stocks, which took a breather after a strong few days

Mineral Resources (ASX:MIN) and its US partner Albemarle will speed up the return of their giant Wodgina mine in WA’s Pilbara region as lithium concentrate prices continue to rise.

Prices for spodumene, the 6% lithium concentrate produced by hard rock miners in Australia for sale to Asian battery makers, have held over US$5000/t on the spot market over the course of the last month.

Last week price reporting agency Fastmarkets MB said supplies of the raw material are so tight amid rising EV demand that spot sales in the China market are averaging US$5750/t.

That’s somewhere around 11 to 12 times the cost of production in WA, inflation not withstanding, encouraging MinRes and its partners to go full throttle.

The first 250,000tpa train at Wodgina, which the MinRes-Albemarle JV announced it would return to production in October last year, will be ready to produce spodumene in May.

Before it’s even reopened the owners have approved the resumption of production at the second train, with first concentrate expected in July.

More expansions are on the cards.

“MinRes and Albemarle have also agreed to review the state of global lithium market towards the end of this calendar year to assess timing for the start-up of Train 3 and the possible construction of Train 4,” MinRes said, a ramp up that would make Wodgina a million tonne a year operation.

It is a far cry from November 2019, when the companies announced the mothballing of the mine just days after finalising a US$1.3 billion deal for Albemarle to take a 60% stake in the operation (MinRes has since announced a non-binding letter agreement that would bump its stake up to 50%).

Back then spodumene was trading for around US$500/t.

MinRes lifts on update

MinRes shares lifted 5.14% to $59.36 on the news, giving the Chris Ellison led miner and mining services provider a market cap of more than $11 billion.

MinRes is now up 39% over the past six months and has recovered almost all of the losses its suffered after posting a shock $36 million loss for the first half of the year and suspending its dividend on falling iron ore prices and grade discounts in February.

That has been driven also by rising iron ore prices, which hovered around US$160/t on Tuesday morning (almost double their November lows of US$87/t).

But Blind Freddy could see the passion of investors around lithium stocks is also behind the upgrades.

MinRes (ASX:MIN) share price today:

Mt Marion upgrade, downstream processing on the cards

MinRes and Ganfeng have also agreed to upgrade their Mt Marion mine near Kalgoorlie-Boulder immediately from 450,000t to 600,000tpa this month to capitalise on the lithium boom.

The 50-50 JV owners will completed a second stage expansion incorporating a dense media separation plant upgrade by the end of the year to take its full run rate to 900,000tpa of mixed grade spodumene or the equivalent of 600,000tpa at a 6% grade.

Both stages of the ramp up will cost less than $120 million.

The first train of the Kemerton lithium hydroxide plant MinRes is building with Albemarle in a 40-60 partnership is expected to produce its first battery grade chemicals in May after spodumene feed was introduced recently, with a second train targeting mechanical completion and first product in the December quarter.

The companies are already looking at the development of further processing capacity for their Wodgina mine as well, with all spodumene ultimately to be processed through conversion facilities either built or acquired by a new 50-50 JV between MinRes and Albemarle.

“For some time now the world has seen extraordinary demand for lithium, driven by the strength of the electric vehicle market. This demand has resulted in a substantial increase in lithium prices, with pricing expected to remain strong for the rest of this decade,” MinRes MD Ellison said.

“I’m proud of the great work our team have done at Wodgina and Mt Marion. As we continue to significantly expand our spodumene supply from these Tier 1 mines in Western Australia, we look forward to creating many more long-term jobs and supporting the surrounding communities for decades to come.

“With a world-class portfolio of highest-quality, long-life lithium assets in a Tier 1 mining jurisdiction, we are well positioned
to capitalise on the continued growth of the global electric vehicle market.”

MinRes, Mincor lead miners on dour day

MinRes defied weakness in other major battery metals and rare earths stocks like Pilbara Minerals (ASX:PLS) and Lynas Rare Earths (ASX:LYC) who took a breather after a couple days of strong gains.

South32 (ASX:S32) was the biggest name to pull resources stocks lower as the Materials sector sunk by almost 1%, while mid-tier lithium miners suffered from some serious profit-taking.

IGO (ASX:IGO) copped a hit after learning an independent expert’s report was likely to sink its $1.1 billion bid to acquire fellow WA nickel company Western Areas (ASX:WSA).

$1.2 billion nickel miner Mincor (ASX:MCR) joined MinRes on the winner’s list, climbing by more than 6% after RBC issued a research note with a $2.75 price target and outperform rating on the Kambalda nickel producer.

Fellow nickel co. Panoramic (ASX:PAN) and iron ore miner Grange Resources (ASX:GRR) were also among the big movers.