Monsters of Rock: MinRes puts more lithium on its plate at Mt Marion

MinRes eyes underground potential at Mt Marion lithium mine in major drill program
6 rig program by end of 2023 after expansion to 900,000tpa capacity
Chris Ellison’s firm hails second “major” Perth Basin gas discovery

Mineral Resources (ASX:MIN) is the second lithium giant today to show it could be sitting on more spodumene, with the first major drill campaign since it came into the Mt Marion mine almost a decade ago showing it could have lithium bearing pegmatites as much as a kilometre below the current open pit.

Mt Marion, 40km south-west of Kalgoorlie-Boulder, is among the wave of lithium operations that opened during the first boom for the EV and battery metal in 2015-2016.

For several years it’s been 50-50 owned by Chris Ellison’s MinRes and China’s Ganfeng after they bought out minority partner Neometals (ASX:NMT) for over $100 million in 2019.

MinRes, which first acquired a stake in the project several years earlier, says it has found the potential to extend the project both via open pit and underground methods in its first major exploration campaign since taking an interest in the asset.

It’s drilled 34km so far this year with six diamond and RC rigs, with exploration drilling capacity to double by the end of 2023 and a massive 12 rig campaign to complete over the 18 months after.

Hits into intrusive pegmatites have already included 51m at 1.3% Li2O from 410m, including 32m at 1.5% Li2O from 411m below the North Pit. Another strike found lithium over 1km below the surface, hitting 43m at 0.7% Li2O from 1039m including 10m at 1.5% Li2O from 1068m.

That comes alongside RC drilling which has found mineralised pegmatite outcropping to the north-west of the North Poit and an extension to the north west of the existing life of mine design in the historically mined Central Pit.

MinRes and Ganfeng are currently commissioning a new processing plant at Mt Marion which will increase its production capacity to 900,000tpa, competitive in scale with other major WA spodumene mines like Pilgangoora, MinRes’ own Wodgina and the world-leasing Greenbushes operation.

Market fundamentals test MinRes marketing

At the same time MinRes has dumped guidance for lithium battery chemical sales, dumping an agreement with Ganfeng that saw it toll treat tonnes from Mt Marion into lithium chemicals at Ganfeng’s refineries in China.

MinRes, which is taking stakes in Chinese factories owned by Wodgina JV partner Albemarle, has withdrawn its guidance of 19,000-21,300t of lithium battery chemicals for FY23, with its share of spodumene concentrate instead to be sold to Ganfeng at market prices.

Converters have struggled to be profitable after a big drop in chemical prices earlier this year, given the continued high cost of spodumene concentrate.

Prices of lithium carbonate and hydroxide have since stabilised in China, both fetching over US$40,000/t on the spot market according to Fastmarkets, but were paying over US$80,000/t last year.

At the same time MinRes has cut its spodumene concentrate shipment guidance for its share of Mt Marion from 160,000-180,000dmt for FY23 to 145,000-150,000t on a 6% Li2O basis after a shipment was delayed to July.

Meanwhile at Wodgina the company has advised it will see spodumene concentrate guidance fall to the lower end of its 150,000-170,000dmt range with lithium chemical production guidance of 11,500-12,500t and sales guidance for lithium chemicals lifting from 5000-6000t to 7000-7500t.

Costs will come in higher than previously forecast, lifting from $850-900/t to $925-975/t (SC6 basis).

Outside of its flagship lithium business, MinRes says it has also made a second major natural gas discovery at North Erregulla Deep-1, 8.3km south-east of its Lockyear Deep-1 natural gas discovery in the Perth Basin.

“The success at North Erregulla Deep-1 is another stride forward in our Perth Basin exploration campaign and our second significant natural gas discovery in less than two years,” MinRes MD Ellison said.

“I am pleased to confirm the appointment of Darren Hardy as Chief Executive, Energy, to lead MinRes’ energy transition strategy. His immediate focus is the successful completion of the Perth Basin drilling campaign and the development of these major discoveries into production.

“The exciting exploration results at Mt Marion highlight we are just scratching the surface of the potential lithium resource, including the possibility of underground mining.

“The early termination of the Mt Marion toll treatment agreement with Ganfeng is a sensible outcome given prevailing market prices, with our world-class lithium assets well-placed to capitalise on growing demand.”

The Mt Marion drill results mark it as the next potential open pit lithium mine that could be extended as an underground operation.

Allkem (ASX:AKE) flagged the start of a study early in FY24 into underground mining at its Mt Cattlin project on WA’s south coast after a major reserve upgrade today.