...Arcadium is not quitting lithium, but is seriously considering exiting lithium in Australia.
u...Why? Obviously, our Aussie capex and opex is way too high to compete at new normal international pricing which I read between the lines as an acknowledgement that it would be some considerable time for it to return to previous pricing levels to provide a decent ROI (return on investment)/
....I had maintained that Australian lithium would have to compete with Chinese/African/South American and US DLE lithium and our cost of operations would compromise project returns for our Australian lithium projects. Because the new normal pricing for lithium may never recover to those levels we saw in 2020-22. ASX-listed lithium giant Arcadium turns its back on Australia Brad ThompsonReporter
Updated Sep 20, 2024 – 3.12pm,first published at 2.02pm
One of the world’s largest lithium producers has cast doubt on its future in Australia less than a year after flagging it would aggressively pursue investment opportunities in the country, instead preparing to exit in favour of South America and Canada.
Arcadium Lithium was created with the $9.7 billion merger of New York-listed Livent and Australia’s Allkem in January. At the time of the deal, Arcadium’s chief executive Paul Graves said the company intended to maintain a major presence in Western Australia, where Allkem operated the Mt Cattlin southeast of Perth.
A frenzy of lithium deals has given way to serious financial pressures at operating mines and among explorers in Australia as the price of the commodity, a key ingredient in electric vehicle batteries, has collapsed. Earlier this month, Arcadium announced plans to suspend its expansion of Mt Cattlin and mothball operations instead.
On Friday, Mr Graves said Arcadium would consider selling Mt Cattlin – its only asset in WA – as lithium prices sink to $US720 a tonne.
“Do we see Australia as a core hub? If capital was unconstrained, having a big footprint in Canada, a big footprint in Argentina and then a big footprint in Australia, would be fantastic. But we don’t have a big footprint in Australia right now,” he said.
“We want to reinvest for investors and for shareholders, and we just don’t have the right asset in Australia to justify that level of investment,” Mr Graves added. “Our primary objective is not to sell Mt Cattlin, but if somebody can offer it a further life that we can’t, we’re certainly open to listen to people.”
“It’s very easy to convince yourself you’re making money because you ignore that [capital costs],” said Mr Graves. “Everybody can cover their operating costs. They’re just going to run out of mine at some point if they do that.”
Arcadium, listed in New York and on the ASX, used an investor strategy day in the United States to hose down suggestions it would need to raise equity to fund growth projects in Canada and Argentina. Even so, the low lithium price has pushed the company to also pause investment in some of its Canadian and Argentinian mines.
The company still expects to double sales volumes by 2028. It plans to slash its capital spending bill by $US500 million ($734 million) over two years by slowing new projects.
Arcadium has been touted as a potential takeover target for Rio 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 the long-term prospects for lithium demand and the toll the price collapse had taken on Arcadium’s share price.
“I do think this is the bottom, but we have to be careful not to think that it’s always a V-shaped curve. We could certainly have a U-shaped curve,” he said.
“I don’t think the industry can continue to function for long at these kinds of prices. And the reason is not because there isn’t enough supply today to meet demand at these prices. There probably is, but demand keeps going up. We’re still seeing mid- to high-teens growth in demand for lithium.”
The lithium price drop has hit expansion plans at many of Arcadium’s rivals including at battery maker CATL, which this month suspended production from its Jiangxi lepidolite mine. The operation, which accounts for roughly 5 per cent of global primary supply, was on track to become the world’s fifth-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, told The Australian Financial Review last week. “But you still need prices 30 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 on the ASX in December. It was trading at $3.68 on Friday.
