The lithium and nickel rout has a way to run, with all eyes on Pilbara Minerals and MinRes production reports this week
Miners will seek state and federal government help amid the critical minerals crisis, but the market will be more interested in what will be next to fall.
Production credits and royalty relief are likely to be the top items on Thursday’s crisis meeting agenda between beleaguered WA lithium and nickel producers, as fresh cracks appear in Australia’s critical minerals sector.
Industry sources say global mining giant Albemarle is considering stockpiling some of its share of production from the giant Greenbushes lithium mine in WA to alleviate supply pressure on lithium pricing, following the lead of China’s Tianqi last year.
And Mineral Resources is understood to have offered its stake in Bill Beament’s Develop Global up for sale over the last month, in a move that would have freed up cash — but may also suggest MinRes’ regional lithium play around Kalgoorlie is under review.
The round table between mining bosses, federal resources minister Madeleine King and WA mines minister David Michael follows a horror start to 2024 for the Australian nickel and lithium sectors, as tumbling prices forced the closure of nickel mines and the mothballing of under-construction lithium projects.
South32 also said it was reviewing the future of its Cerro Matoso nickel mine in Colombia in the face of the rapid growth of cheap nickel flooding world markets from Indonesia.
In lithium, which is also seeing tumbling prices, Liontown Resources lost a $760m lending facility in the face of forecasts of ongoing low prices, forcing the company to scale back the development of its Kathleen Valley project. It followed similar moves by Core Lithium last month.
Major lithium producers Pilbara Minerals and Mineral Resources will report their December quarter production this week, on Wednesday and Thursday respectively, and both will be watched closely for signs of any pullbacks in project spending — particularly around Pilbara Minerals’ plan to expand its WA output to up to a million tonnes of lithium concentrate per year.
While MinRes has not signalled it is considering any major changes to its immediate lithium mining operations at Wodgina in the Pilbara and Mt Marion and Bald Hill in WA’s Goldfields region, market sources say recent moves to offload the company’s stake in Develop Global suggest a broader play to use the company’s Goldfields’ processing plants as a regional hub to expand production is under review.
MinRes backed Develop’s acquisition of Essential Metals last year, handing the Bill Beament control of a small lithium project seen by the market as most useful as a feed operation for MinRes processing plants in the region.
In December, Develop’s mining services business was awarded a $46m contract to kick off work on the early stages of an exploration decline to send MinRes’ Mt Marion lithium mine underground.
MinRes owns about 33.7 million Develop shares, worth about $66.7m at Tuesday’s $1.98 closing price.
But, as the pullback in lithium gathers pace, beleaguered nickel and lithium companies are likely to combine on a unity ticket at Thursday’s meeting with Ms King and Mr Michael.
MinRes will join Dr Forrest’s Wyloo — and other industry players such as BHP, Glencore and IGO — at the meeting, with mining bosses likely to push for the development of a framework for royalty relief from the WA government which could be quickly implemented in the event of sharp price falls.
The royalty relief could apply to nickel in the short term, and lithium if prices fall further. Relief from port and other state government charges will also be raised.
A production tax credit which would apply to downstream processing of Australian critical minerals will also be pushed by industry, a long standing position put by the industry lobby group Association of Mining and Exploration Companies (AMEC).
But Wyloo and other nickel companies are also likely to ask for Federal intervention aimed at slowing the flood of Indonesian nickel into the market — including the requirement for electric vehicle manufacturers to tell consumers if they use Indonesian nickel.
Australian miners will also ask the federal government to seek support from the US government to protect and expand access to the US market for Australian critical minerals, through President Joe Biden’s Inflation Reduction Act.
For nickel miners, this would include lobbying against any free trade deal between the US and Indonesia.
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