Monsters of Rock: Twiggy Forrest is ‘just not seeing’ a shortage of lithium. Come again?
Andrew Forrest, whose iron ore miner cum green energy play faces a potentially big bill to source battery metals to build the infrastructure required to decarbonise its operations by 2030, says he is “just not seeing” a shortage of lithium.
Responding to questions on a quarterly call with analysts and media today, the Pilbara billionaire indicated the company could look to become an acquirer of assets.
It has had little appetite to move outside iron ore until the creation of its green energy and hydrogen arm Fortescue Future Industries a couple years ago.
But it has boasted an extensive exploration package in Australia and abroad for years, with a side hustle exploring for gold and copper.
Twiggy’s private mining investment vehicle Wyloo Metals has also made investments in nickel and rare earths in recent years, including its win over BHP (ASX:BHP) in the race for Canada’s Noront Resources last year.
But he is not panicked about securing supplies of lithium, a commodity so hot prices have quadrupled over the past year to levels so high Elon Musk would be paying ~US$100 billion a year to source the metal it needs for its aspirational target of producing 20m EVs a year.
“Look lithium, I’m just not seeing a shortage. There is so many lithium projects we get offered,” Forrest said.
“It’s just one of those things which is just not keeping me awake at night at all. But to get specific about FFI and lithium … Fortescue Metals Group is a fantastic both explorer and developer, but also acquirer of assets.
“And as you’ve heard say in the past we’ll be taking responsibility as mining and exploration company without many peers in success to deliver the battery metals and the future facing metals which FFI needs.
“The beauty of FFI is that it gives us a really clear view into the future as to what is going to be required by when.”
FFI CEO Mark Hutchinson said the company would initially be “buying from the marketplace” while noting FMG’s expertise as a developer and operator of mining assets.
But its worth noting that being offered projects, and being able to develop projects are not the same thing.
While some analysts think the lithium market has run too hot, other sector observers say while there is a general expectation the lithium market could come back into balance by the middle of this decade, it is a fragile one.
Pilbara Minerals (ASX:PLS) demonstrated just how strong producer margins are right now in the lithium raw materials space, announcing it made $8.5 million a day in the September quarter, with its latest spot spodumene sale drawing a record 6% Li2O equivalent price of US$8000/t.
When the shoe is on the other foot the answer could be different.
FMG expects to produce 187-192Mt of iron ore in the Pilbara in FY23, is planning to ramp up to an additional 22Mt of high grade iron ore out of the Pilbara through its Iron Bridge magnetite mine, where commissioning will begin next week.
It pushed out a record first quarter with 47.5Mt of shipments in the three months to September 30.
It is also exploring for a new iron ore province at the Belinga project in Gabon, while fellow miners BHP, Vale, Rio Tinto (ASX:RIO), Mineral Resources (ASX:MIN) and Roy Hill/Hancock Prospecting all have plans to bring additional production into the market in the coming years.
That is to say nothing of the Simandou mine in Guinea, where Rio Tinto and a Chinese consortium are looking to develop the world’s largest undeveloped high grade iron ore resource, all amid a backdrop of uncertainty around China’s economy.
FMG has three points there. a) its low cost base means it is insulated against changes in the iron ore market, b) Simandou is a distinct product to FMG’s lower grade ore, and c) mines will be harder to build than people think given modern ESG and community expectations are blowing out development timelines.
“The more recent changes to the regulatory approvals and community expectations means that it’s more difficult to bring on new mining areas, even with ones with existing approvals,” FMG CFO Ian Wells said.
“And clearly with the well documented challenges with Eliwana and having to change mine plans and so forth. So we’re not necessarily convinced that the supply and demand models have been updated to (reflect) that.”
Newcrest Mining (ASX:NCM) rose over 3.2% after producing 527,000oz of gold and 32,000t of copper in the September quarter at all in sustaining costs of US$1098/oz.
Down 17% on the quarter, NCM expects production to lift over the course of the year as it moves on from planned maintenance in the September quarter.
Newcrest joined the broader resources sector (1.68%) despite concerns from analysts the quarter was softer than expected.
RBC’s Alex Barkley said the result came in 8% below its forecasts, with all in sustaining costs 7% higher.
“Low rainfall and reduced water access reduced Lihir gold by ~5koz and NCM expect water access could negatively impact future quarters,” he said in a note.
“Brucejack remains closed with an ongoing safety incident.
“The Havieron study has been delayed from Q2. Positive drilling continued at Brucejack and nearby deposits.
“We may have underestimated the shut-time at Cadia but Q1 still underperformed vs RBCe and market expectations. Combined with ongoing water concerns at Lihir we see this result as slightly negative.”
Elsewhere in the gold space higher costs was a theme, although the market reaction was by and large positive.
Gold Road Resources (ASX:GOR) produced 83,635oz on a 100% basis at the 50-50 Gruyere JV with Gold Fields at $1426/oz, down from 85,767oz at $1250/oz in June and towards the higher end of its $1270-1470/oz guidance range.
Regis Resources (ASX:RRL) delivered 114,831oz at $1782oz, Westgold (ASX:WGX) produced 66,048oz at $2106/oz, Dacian Gold (ASX:DCN), in the midst of a takeover/merger with Genesis Minerals (ASX:GMD) churned out 21,525oz at $1594/oz, and African gold miner Resolute (ASX:RSG) delivered 90,387oz at US$1513/oz.
Aurelia Metals (ASX:AMI) announced production at its Peak, Hera and Dargues mines of 22,530oz at $2643/oz, a couple weeks after copping a disastrous market response to its Federation feasibility study and a rumoured capital raising.
A weaker US dollar saw gold rise above US$1660/oz last night.