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The only profitablelithium mine in Australia revealed

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

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

The world’s biggest hard rock lithium mine is the only one ofAustralia’s seven producing lithium projects to be profitable, the brokerargued, 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 collapsedmore than 23 per cent over the past 45 days, fetching $US720 a tonne ($1066) onSeptember 2, according to S&P Global’s Platts. That ore, which is spodumeneconcentrate with 6 per cent lithium content, was fetching more than $US8000 atonne in 2022

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

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

Citi examined the seven Australian mines using analysispopularised by gold miners to arrive at a breakeven figure known as an all-insustaining 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, BaldHill, Mt Marion, and Kathleen Valley – all screen as loss-making.

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

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

Citi acknowledges that as operations get larger, the costs ofseveral producers such as Pilgangoora and Wodgina will improve with economiesof 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 Decemberquarter, but that is contingent on further supply cuts to rebalance the market.Australia’s seven lithium mines account for around 35 per cent of globalsupply, Citi estimates.