Interesting article in today's AFR regarding Aussie Lithium Miners production costs (helpful given everyone's recent speculation about this on the forum, and the relentless short attack on LTR, PLS, etc).

In it Citi has attempted to pinpoint the 6 big Aussie miners production costs - on actual basis (blue), then with freight & royalties (orange), and finally with planned growth cap-ex thrown on top (yellow).

On a Fully on Board basis - we come in around US$900/tonne, versus current Lithium Price of low US$700s. So as expected we (and everyone else other than Greenbushes) we are losing money at today's woeful Lithium prices. Excluding Growth Cap-Ex, our production cost comes in around equal third with Bald Hill (behind Pilgangoora & Greenbushes). Wodgina, Mt Cattlin, Mt Marion all more expensive.

If you include Growth Cap-ex, they add on an extra $US600 to LTR's production cost, and we come in highest cost on that basis. However given we are on the tail-end of maximum growth cap-ex investment to get a scaleable world class minie, I find that measure a little simplistic & disingenuous - AFR's reporting treats it like a permanent, ongoing cost of production - rather than a one-off large period of upfront expenditure to get a world class mine up & running, and then any further growth cap-ex being highly optional (unless it makes sense to play Pilbara's game of targeting lowest unit cost & squeeze out other producers, we simply won't do it). Even Pilbara is at US$1200/tonne with their growth cap-ex factored in.

Will be fascinating to watch what happens from here. This is a truly broken market in the short-term in almost every sense of the word. Rational decision making will eventually prevail - by way of rational curtailment of supply by the many higher-cost producers, or today's current supply being eventually overwhelmed by demand from the global scale-up in Lithium demand. The longer this disfunctional market prevails, the more cancelled new mine projects, the bigger the bounce & squeeze on the other side - given the long lead times of bringing new mines into production.

If we have to eventually do a modest rights issue to survive the Lithium winter, so be it. However I suspect we're more likely to see more deep-pocketed strategic investment/support by industry players like LG, or a counter-cyclical pounce on what is a world class mine by way of a takeover offer. Markets these days are so incredibly short-term focused, and riddled with predatory short-trading trying to pre-empt & force a capital raise. Hot money has completely overwhelmed patient capital these days. Today's SP should look incredibly cheap by mid-next year, and anyone with more than a 6-12 month horizon should do very well in time.

Looking forward to seeing some stuff break, China shoot itself in the foot medium to long term, and governments maybe one day even waking the hell up to the stupidity of letting our precious resources be exploited for a pittance by having allowed one country to corner a future facing industry for its own strategic interests.

Lithium price: Greenbushes is the only profitable lithium mine in Australia (copyright link)

The only profitable lithium mine in Australia revealed

Elouise FowlerReporter

Sep 4, 2024

Every Australian lithium mine is losing money at today’s prices except for Western Australia’s famously low-cost Greenbushes, which could withstand a deeper commodity price rout, according to broker Citi.

Greenbushes is a joint venture 49 per cent-owned by US-listed Albemarle, and 51 per cent by ASX-listed IGO and China’s Tianqi.

The world’s biggest hard rock lithium mine is the only one of Australia’s seven producing lithium projects to be profitable, the broker argued, based on its analysis of their running costs at spot prices.

UBS warns the lithium sector will face a wave of mine closures as prices for the battery material struggle despite some companies putting projects on ice to sit out the bear market.

Prices for the lithium ore typical of Australia have collapsed more than 23 per cent over the past 45 days, fetching $US720 a tonne ($1066) on September 2, according to S&P Global’s Platts. That ore, which is spodumene concentrate with 6 per cent lithium content, was fetching more than $US8000 a tonne in 2022.

Citi was puzzled that no major cuts in supply, known as curtailments in industry shorthand, had been declared in Australia, given the lithium spot price is trading at half the long-term consensus price of $US1500 a tonne. Last month, Arcadium flagged it may have to shut Mt Cattlin.

For investors, it was a matter of whether long-term assumed prices are too high, or whether lithium companies are “just poorly run”, the broker speculated.

Citi examined the seven Australian mines using analysis popularised by gold miners to arrive at a breakeven figure known as an all-in sustaining cost including freight and royalties.

Greenbushes can still make a profit if the spot price reaches $US750 a tonne, Citi found.

The remaining six mines – Pilgangoora, Mt Cattlin, Wodgina, Bald Hill, Mt Marion, and Kathleen Valley – all screen as loss-making.

With expansion capex factored in, Liontown’s Kathleen Valley is the least profitable of all, only breaking even when the spot price exceeds $US1500 a tonne. Excluding that growth capital, the mine is profitable at around $US900 a tonne.

Mineral Resources’ Mt Marion, which it half-owns with China’s Ganfeng Lithium, is second from the bottom, achieving breakeven when prices exceed $US1400 a tonne. When growth is not included, the implied breakeven price is $US1300 a tonne.

Citi acknowledges that as operations get larger, the costs of several producers such as Pilgangoora and Wodgina will improve with economies of scale.

The analysts relied on a June quarter average spodumene price of $US1153 a tonne.

Lithium prices are forecast to reach their low in the December quarter, but that is contingent on further supply cuts to rebalance the market. Australia’s seven lithium mines account for around 35 per cent of global supply, Citi estimates.

Elouise Fowler is a journalist for The Australian Financial Review based in the Melbourne office.