Very important read..
Did my best to cleanup in text via page source (sorry there was some formatting errors):ASX-listed lithiumgiant Arcadium turns its back on Australia
One of the world’s largest lithium producers has cast doubt onits future in Australia less than a year after flagging it would aggressivelypursue investment opportunities in the country, and is instead preparing toexit in favour of South America and Canada.
Arcadium Lithium was officially created in January with the $9.7billion merger of New York-listed Livent and Australia’s Allkem. At the time ofthe deal, Arcadium’s chief executive Paul Graves said the company intended tomaintain a major presence in Western Australia, where Allkem operated the MtCattlin site south-east of Perth
A frenzy of lithium deals has given way to serious financialpressures at operating mines and among explorers in Australia as the price ofthe commodity, a key ingredient in electric vehicle batteries, has collapsed.Earlier this month, Arcadium announced plans to suspend its expansion of MtCattlin andmothball operations instead.
On Friday, Mr Graves said Arcadium would consider selling MtCattlin – its only asset in WA – as lithium prices sink to $US720 a tonne.
“Do we see Australia as a core hub? If capital wasunconstrained, having a big footprint in Canada, a big footprint in Argentinaand then a big footprint in Australia, would be fantastic. But we don’t have abig footprint in Australia right now,” he said.
We want to reinvest for investorsand for shareholders, and we just don’t have the right asset in Australia tojustify that level of investment,” Mr Graves added. “Our primary objective isnot to sell Mt Cattlin, but if somebody can offer it a further life that wecan’t, we’re certainly open to listen to people.”
Analysis by brokers at Citi showedevery lithium mine in WA wouldlose money if the price dipped below $US1000 per tonne, except the Greenbushesoperationsthat is owned by China’s Tianqi, ASX-listed IGO and American giant Albemarle.
Mr Graves said the analysis produced by Citi was comprehensive.The bank’s brokers suggested Mt Cattlin would break even if the lithium pricewas about $US1200 a tonne.
“It’s very easy to convince yourself you’re making money becauseyou ignore that [capital costs],” said Mr Graves. “Everybody can cover theiroperating costs. They’re just going to run out of mine at some point if they dothat.”
Arcadium, listed in New York and on the ASX, used an investorstrategy day in the United States to hose down suggestions it would need toraise equity to fund growth projects in Canada and Argentina. Even so, the lowlithium price has pushed the company to also pause investment in some of itsCanadian and Argentinian mines.
The company still expects to double sales volumes by 2028. Itplans to slash its capital spending bill by $US500 million ($734 million) overtwo years by slowing new projects.
Arcadium has been touted as apotential takeover target forRio Tinto, in part because Rio has big ambitions in lithium and is poised to start producing the key battery ingredient from its Rincon operations close to Arcadium’s Argentinian assets
Mr Graves said the speculation was not a shock given thelong-term prospects for lithium demand and the toll the price collapse hadtaken on Arcadium’s share price.
“I do think this is the bottom, but we have to be careful not tothink that it’s always a V-shaped curve. We could certainly have a U-shapedcurve,” he said.
“I don’t think the industry can continue to function for long atthese kinds of prices. And the reason is not because there isn’t enough supplytoday to meet demand at these prices. There probably is, but demand keeps goingup. We’re still seeing mid- to high-teens growth in demand for lithium.”
The lithium price drop has hit expansion plans at many ofArcadium’s rivals including at battery maker CATL, which this month suspendedproduction from its Jiangxi lepidolite mine. The operation, which accounts forroughly 5 per cent of global primary supply, was on track to become the world’sfifth-largest lithium mine by volume.
“The bell is being rung for the bottom of the lithium market,”David Franklyn, a portfolio manager of Argonaut’s Natural Resources Fund, toldTheAustralian Financial Reviewlast week. “But you still need prices 30 per cent to 40 per cent higher than they were before companies stop losing money, let alone making money.”
Arcadium shares reached a high of $11.57 soon after listing onthe ASX in January. It was trading at $3.68 on Friday.
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