Monsters of Rock: How close are we to the lithium revival?

Pilbara Minerals and Mineral Resources reported stronger prices this week, with the latter unwilling to shut any more operations.

Josh Chiat

6 min read

January 31, 2025 - 1:03PM

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Lithium prices show signs of life in quarterly reports
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Gina Rinehart tops up her Lynas stake

Monsters of Rock drills deeper into the ASX’s large cap mining stocks with mining scribe Josh Chiat

Mineral Resources (ASX:MIN) won't shut down any more lithium mines in response to bottom of the cycle pricing, with its CFO warning prices won't be at US$900/t in five years' time.

The lithium producer was forced to ice its Bald Hill mine last year in response to the lithium winter, caused by a sudden oversupply of lithium chemical and concentrate feedstocks off the back of record prices in late 2022.

But CFO Mark Wilson told analysts this week its larger Wodgina and Mt Marion mines – half-owned with Albemarle and Ganfeng respectively – would remain in operation.

Wilson said MinRes was unwilling to lose staff with strong operational knowledge to the industry and face risks reviving operations in a kneejerk reaction should prices for the electric vehicle metal rebound.

MIN's share of Wodgina produced 54,000t and shipped 61,000t of 5.7% Li2O spodumene concentrate, collecting revenue of US$834/dmt on a 6% Li2O basis or US$800/t on a 5.7% Li2O basis in the December quarter, the latter figure up 5% on US$763/dmt for a 5,4% product in the September quarter.

Mt Marion produced 58,000t and shipped 55,000t of 4.4% Li2O product at US$596/dmt, up 8% in terms of prices on the September quarter and slightly higher on a 6% basis (US$816/t vs US$813/t).

Bald Hill shipped 27,000t of 5% Li2O con at a price of US$683/dmt (US$829/dmt 6%) before it was placed on care and maintenance.

"There's no conversation (with the JV partners) about putting them on care and maintenance," Wilson said.

"I think everybody understands that these assets, care and maintenance is not a good choice for a big complex lithium asset. Bald Hill is a little different, because we can turn that on pretty quickly.

"With Wodgina, with float in particular, that's a challenging thing to turn off and turn on again, not the least of which is the loss of experience."

Costs of A$1013/dmt at Wodgina and $1076/dmt at Mt Marion for the first half are expected to fall over the second half, with full year cost guidance maintained at $800-890/dmt and $870-970/dmt respectively.

"The way I think about it is this, as we take those costs out the mines will certainly be profitable in an accounting sense," Wilson added.

"What we're continuing to do is open (Wodgina) up and we're trying to get to a point where we've got clean feed for three trains consistently. It's taken longer than we expected, I accept that.

"But I've got a belief and the business has a belief that the lithium market is not going to stay at US$900/t for the next five years and so it's important from my perspective that we continue to develop those mine and invest so when the market does need that product and can take it we're in a position to deliver it.

"One of the risks for the lithium market globally is underinvestment in projects over the last couple of year and that has the risk for consumers as you would know of seeing a steeper rebound in prices.

"We're trying to make sure we're positioned to take advantage of that – that's how we're thinking."

MinRes, which is seeking a new leader to replace iconic founder Chris Ellison over the next year or so after he was caught up in a scandal over related party payments and corporate governance, is anticipating reporting a net debt position of $5.1bn as of December 31, 2024. It has $700m in cash and $800m in undrawn facilities for liquidity, but is hopeful the ramp up of the Onslow Iron mine to 35Mtpa will help it generate cash flows to pay down debt.

The project shipped first ore from Ashburton in the middle of 2025 and exported 2.5Mt in the December half at $77/t. MIN anticipates shipping 10.5-11.7Mt in the full year at $58-68/t for its share of the mine, which in total shipped 3.2Mt over the December quarter on a 100% basis. Production for the month of January is expected to run at a rate of 1.6Mt or over 19Mtpa.

IG-WOE

(Yeah, I know we used a similar heading last week. Still holds.)

Wilson's comments came a day after Pilbara Minerals (ASX:PLS) MD Dale Henderson suggested the market for the battery metal could be tightening.

Having beat expectations on sales and pricing itself in the December quarter, Henderson said on the Pilgangoora miner's quarterly call that auction sales from international miners Albemarle and SQM at around US$920/t showed supply was tightening.

While commentary about the slowing of EV demand growth dominated mainstream conjecture last year, the electric vehicle market actually grew 23% to 17 million units.

The key may be where those sales were though. China's market share rose from 50% to 64% or 11m units, as high interest rates and an unwinding of ESG initiatives in the west hurt emobility elsewhere.

But lithium stocks are still incurring heavy losses.

IGO (ASX:IGO) posted an earnings before interest, tax, depreciation and amortisation loss of $79m for the December quarter, a figure that doesn't even included the planned impairment of its misfiring Kwinana lithium hydroxide refinery. IGO owns a 49% stake alongside China's Tianqi as part of the Tianqi Lithium Energy Australia JV.

The JV also owns 51% of Greenbushes, the world's highest grade spodumene mine.

Greenbushes produced 392,000t in the December quarter, a 3% drop QoQ, with costs rising 17% to $324/t.

Lithium hydroxide production rose 6% to 1593t, but that remains well short of the plant's design capacity of 24,000t. Amid the ramp up issues and market weakness a second 24,000t train has been cancelled. Kwinana reported a large $105m EBITDA loss, impacting by net realisable value adjustments, with IGO's net share loss from the TLEA JV deteriorating 235% from a $37m profit in the September quarter to a $57m loss in December.

Spodumene sales from Greenbushes fell 20% QoQ to 312,ooot, with port congestion delaying a shipment to January. Prices received for Greenbushes con fell from US$872/t to US$736/t FOB Australia, showing producers are not out of the woods yet when it comes to lithium prices.

IGO's Nova nickel mine meanwhile is trending towards the bottom end of guidance for FY25, with nickel production 8% lower QoQ to 3393t and copper output 23% off at 1349t. Cash costs rose 13% from $6.50/lb to $7.35/lb.

Elsewhere in the market

While lithium crystal ball gazing has been a major focus this week, gold has continued to go from strength to strength, hitting an all time high on the futures market today.

The All Ords gold sub-index is up 2.82% in morning trade, with spot gold nudging close to US$2800/oz. New York futures were even more exuberant, clearing US$2846/oz, with Aussie dollar spot gold clearing $4500/oz for the first time.

It comes after gold prices hit new closing highs in 2024 as central bank buying and safe haven demand overpowered the headwinds of a strong US dollar and timid US Fed rate cutting cycle.

This week has seen US President Donald Trump threaten to break the independence of the Federal Reserve, launching into a new temper tantrum after it decided to pause rates at its latest meeting on Wednesday, before doubling down on plans to launch 25% tariffs on products from friendly neighbours Canada and Mexico. That drove safe haven buying higher.

US GDP growth also missed, up 2.3% in the December quarter against expectations of a 2.5% print.

Silver was also up 2.8% to US$31.57/oz. A European rate cut also hurt the US dollar, with a weaker USD typically a trigger for higher gold.

"The USD fell after the ECB cut interest rates by 25bp and the latest economic data showed inflation adjusted gross domestic product in the US increased at an annualised rate of 2.3% in Q4," ANZ Research said in a note.

"Trump’s tariffs are likely to lead to measurably higher inflation, a concern the broader market continues to hold. This was borne out in trade data released yesterday.

"Swiss exports of gold to the US surged to the highest level since Russia’s invasion of Ukraine, in a sign that investors were keen to protect themselves from the impact of Trump’s economic policies. Switzerland shipped 64.2t of gold to the US in December, the most since March 2022. That was 11 times more than it shipped in the previous month."

And Gina Rinehart has upped her stake in rare earths major Lynas (ASX:LYC), the largest producer of magnet metals outside China. An entry onto the share registers of both Lynas and US based MP Materials last year led to speculation the iron ore magnate could become kingmaker in a combination that would create a giant with a virtual monopoly in the ex-China market.

Lynas previously held talks with MP over a tie-up. A filing to the ASX on Friday revealed Gina had been a big buyer of Lynas stock since August, spending ~$64 million at an average of $6.87 in on-market purchase and acquisitions through derivatives to add almost 10m Lynas shares to her portfolio.

Her stake in the Mt Weld miner has listed from 7.14% to 8.21%.