Pilbara Minerals fears lithium industry carnage on price slump as it halts its own operations
Pilbara Minerals is moving a plant into care and maintenance until lithium’s price improves and CEO Dale Henderson is surprised more producers haven’t already hit hard times.
Pilbara Minerals fears more carnage among lithium producers after moving to put part of its own operations into care and maintenance.
Chief executive Dale Henderson said he was surprised more lithium producers hadn’t already fallen by the wayside amid a prolonged slump in price for the battery ingredient.
Pilbara Minerals slipped into the red in the September quarter and is set to axe about 50 jobs as it mothballs one of two processing plants at its flagship Pilgangoora lithium mine in Western Australia.
The biggest pure-play lithium miner on the ASX said the Ngungaju plant would remain in care and maintenance until there was a significant improvement in lithium prices.
The price Pilbara Minerals received for its 5.3 per cent spodumene concentrate fell 18 per cent quarter on quarter to $US682 a tonne. The same product was fetching $US3256 a tonne in mid-2023.
Mr Henderson backed Pilbara Minerals to ride out the storm but said others faced an uphill battle to survive.
“There are a number of suppliers that frankly we’re a little bit surprised haven’t bowed out at this point,” he said. “Good luck to them but we suspect they will have to depart at this price level. It’s just a question of when.”
Gina Rinehart-backed Liontown Resources is still in the process of ramping up its Kathleen Valley mine in WA but considering scaling back production.
Liontown boss Tony Ottaviano vowed Australia’s newest lithium mine would not go into care and maintenance. “It is a likely scenario (scaling back production),” he said. “It is one of a few scenarios and the one scenario that’s not there, for the avoidance of any doubt, is care and maintenance.”
Mr Ottaviano said Liontown was continuing talks with the WA government about royalty relief. The WA government offered royalty relief to nickel producers this year but it was too little, too late to save the industry from collapse.
Mr Henderson said royalty relief would not have shifted the dial enough to avoid the temporary shutdown of the Ngungaju plant. “We’re happy for all the help we can get and will gladly take it all,” he said. “As it relates to others asking for royalty relief, if anything was to be done it needs to be industry-wide and for all, not just selected for projects.”
Pilbara Minerals acquired the Ngungaju plant in 2020 when its Pilgangoora neighbour, Altura Mining, fell victim to the last big crash in lithium prices.
WA’s Labor government is considering the request for royalty relief. It rolled out a 12-month, 50 per cent royalty break for the lithium industry in late 2020 after the price plunged below production costs to about $US400 a tonne. Pilbara Minerals and other lithium miners repaid the royalties within a year when the price rebounded strongly.
Mr Henderson said it was possible lithium prices could again rebound quickly but admitted the market was notoriously difficult to predict.
He said Pilbara Minerals had no regrets about making a near $560m takeover play for Latin Resources and its flagship lithium project Salinas in Brazil in August at what some thought was the bottom of the market.
Rio Tinto bet big on lithium this month, striking $US6.7bn ($9.9bn) all-cash deal to acquire Arcadium Lithium.
The Rio deal was done with Arcadium in the throes of mothballing its Mt Cattlin mine in WA and focusing on lithium brine projects in Argentina.
Mr Ottaviano took it as a positive for Liontown that some lithium lepidolite operations in China and Africa had been suspended, and that closer to home in WA tonnes were coming out of the market.
He said Liontown would provide mine plan, cost of production and other guidance to the market before the end of December.
Pilbara Minerals, the most heavily shorted stock on the ASX, cut its full year production guidance from 800,000-840,000 tonnes to 700,000-740,000 tonnes.
The cash margin for its mining and processing operations was $49m in the three months to September 30, but the business suffered a $2m loss after spending on growth projects and sustaining capital.
Pilbara Minerals revised operating costs guidance to $620-$640 a tonne, down from $650-$700 a tonne.