Pilbara Minerals, Greenbushes push ahead with expansion
To cut, or not? That’s the question for WA lithium majors looking to add new production capacity. MinRes says it will slow down while others are ramping up for the next price cycle.
Two out of three of WA’s lithium majors are pushing ahead with expansion plans, with only Chris Ellison’s Mineral Resources pulling back on plans to lift the company’s lithium output.
MinRes this week backtracked on earlier plans to ramp up output from the third production train at its Wodgina mine in the Pilbara until at least the middle of the year, with Mr Ellison telling analysts on Thursday there was not enough demand to justify lifting output in the current market.
Instead MinRes will focus on cutting costs at both Wodgina - owned with lithium Albemarle - and at its Mt Marion mine near Kalgoorlie, a joint venture with China’s Ganfeng.
Mr Ellison said told analysts there was “no chance” the company would considering mothballing or curtailing production at either of its Mt Marion or Bald Hill mines, however.
But rival lithium major Pilbara Minerals does not plan to follow suit, according to managing director Dale Henderson, saying the need to drive down costs meant the company will push on with its project to lift production at Pilgangoora to 1 million tonnes a year, which itself builds on a current expansion targeting around 680,000 tonnes a year of lithium concentrate.
“We’re mid-flight in terms of those expansions, we’re well underway. But more importantly the expanded capacity supports improved cost,s we do get some scale benefits,” he told The Australian.
“We are already a low cost operator in our space and we think it will improve that further. And the last key benefit is this retreat that we’ve seen in the market - and the pullback of pricing - potentially sows the seeds of the next cycle, and we want to be positioned to enjoy the benefits of that as we did before, with our Altura Mining acquisition.”
And, while the partners of the giant Greenbushes mine in the South West of WA have previously announced a pull-back in sales and the stockpiling of some material, IGO boss Ivan Vella told analysts on Thursday there were no current plans to curtail work on expansions that will lift the mine’s output well beyond the current 1.5 million tonne a year production rate.
The joint venture partners - which include Albemarle, IGO and China’s Tianqi - have previously flagged a 100,000 production pull-back at Greenbushes, but Mr Vella said there were no plans to curtail the addition of another production train at the mine, and the partners were still running a feasibility study on further future expansions.
“There’s no one wavering or change, there is no attempt to slow it down or adjust that,” he said.
But, after IGO took a hit earlier this year after its joint venture with Tianqi elected not to pay a dividend from the December quarter, Mr Vella said the company was in discussions with all of the partners in Greenbushes to increase the WA company’s influence at Greenbushes.
Mr Vella said he would not be able to give the market clarity on when dividends from the joint venture would resume until the partners finalised the budgets for the operation for the next year.
The mine’s operating company, Talison, is half owned by Albemarle and half owned by the TLEA joint venture between Tianqi and IGO, with IGO the minority partner.
“I am very clear that we only want cash to flow one way in this business - from Talison and up to TLEA and out to IGO. We don’t really want to have cash calls ever having to go the other way,” he said.
IGO declared an 11c a share interim dividend on Thursday despite the dive in lithium and nickel prices more than halving the company’s net profit for the first half of the year.
The WA critical minerals producer posted a $288.3m net profit for the first half, down 53 per cent on the first half of the previous financial year.
The company said its underlying net profit - excluding $172m of impairments booked against IGO’s Cosmos and Forrestania nickel assets - was $454.4m, down only 26 per cent compared to the first half of the previous financial year.
Pilbara Minerals withdrew payment of an interim dividend to preserve cash amid the lithium price plunge, with the company posting a sharply reduced half-year profit on Thursday.
The lithium concentrate producer posted a $220m half-year net profit, down 78 per cent from the $1.24bn it booked for the first half of last financial year. Revenue for the period was down 65 per cent to $757m - largely reflecting the 67 per cent fall in average realised prices, to $US1645 a tonne.
Earnings before interest, tax, depreciation and amortisation fell 77 per cent to $757m, with underlying net profit down 78 per cent to $273m.
Despite the company ending 2023 with $2.14bn in cash available, Mr Henderson said the decision was a “prudent” one to preserve the company’s options amid an uncertain market.
MinRes released its half-year accounts late on Wednesday, declaring a 20c a share interim dividend after booking a $537.3m net profit for the half.
Although strong iron ore prices boosted its earnings for the period, underlying EBITDA for the company fell 28 per cent compared to the first half of the previous financial year, when lithium prices were soaring.
MinRes finished December with $1.4bn in cash and net debt of $3.55bn.
MinRes shares closed up $1.81 to $60.90, with IGO up 26c to $7.32 and Pilbara Minerals closing unchanged at $3.66.
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