That announcement gives some hints why Min would be interested in ESS's resource and in my view will ultimately go above the TLEA offer. I dont expect it will go anywhere near $ 1.00 but I still hold view $0.60-$0.70 is achievable and a reasonable price for the resource for both parties. The Mt Marion grade after concentration was only 3.8 % which is why its costs were high and it has moved its guidance up to $1200-1250 per tonne for current year. This is actually a double whammy as it makes your costs higher but then you also get paid less as to a converter their less bang for your buck at the lower concentration of 3.8%.
ESS's asset at Pioneer Dome has a couple of advantages , obviously opportunity to provide additional supply to Min's expanded plant but also possibly much cheaper throughput in the near term rather than relying on the inconsistent and costly feedstock they have now......
They will soon have capacity to do 600 ktpa at SC6 equivalent. Last qtr they sold 40 K dmt SC6 equivalent , at that run rate they have plenty of room to purchase another potential feedstock to that plant to fill out its capacity especially if that feedstock helps them lift their overall concentrate level.
Some on this thread have said Min wont be in a rush to buy ESS as it will just go into the que for them to process far down the track. In my view that is unlikely when you look at the announcement this morning by Min. Likely the ESS feed if coming from a cheap ore of greater than 1% will yield much higher than 3.80 % after concentration which would help Min both lower its costs number and raise its revenue number in the short run.
This is supported by the DFS, ESS put out in February which indicated 5.7 % concentration was achievable with the ESS ore. That is miles above MIN's current hit rate of 3.8 %. Furthermore that DFS indicated to produce a concentrate of that level would cost $ 1030 / tonne, way cheaper than what MIN is achieving now. No admiteddly one is a desktop number and the other reality, but there was obviously I assume some science to that ESS number. That cost also included processing costs at site to concentrate it which with MIN buying it would not be needed. Likely that ore extracted and shipped out over to Min's increased facility would see a processing cost for MIN well under $1000/ tonne, way cheaper than what they achieved last qtr. That has to be attractive.
Also if what they are mining at Mt Marion is only yielding 3.80 % after concentration, one would think no matter how many mining fronts they open there, you could be filling up that added capacity with ore that is likely going to be dear to process. All points to ESS being a value accretive acquisition in the short term, and being far more than a play just to add to overall mining resources/reserves for production way down the road somewhere.
If you add these savings in Opx costs and likely higher revenue figure by lifting concentrate grade and then add on top the fact Min has no capex here to outlay paying a price above the TLEA offer makes a lot of sense.
From the Min announcement this morning.........
Expansion activities to double plant capacity to 900ktpa of mixed grade spodumene concentrate (100% basis) (570-
600ktpa SC6 equivalent) accelerated during the quarter. A total of 725 people were on site to support existing operations
as well as the integration of the expansion. Accommodation and flights have been challenging due to multiple projects in
the region and the mine preparing for higher volumes once commissioning is complete, which impacted bed availability.
The site has subsequently come off the peak workforce demands, with the crushing plant completed and going through
the final stage of commissioning. Construction works continue on non-process infrastructure and the beneficiation plant.
The Mt Marion expansion progressed and remains in line with the initial budget of $120 million. Completion of the expansion
is now anticipated to commence from mid-May. A study to ensure water security of the project was undertaken, leading to
a decision to install dry stack tailings. This investment will halve water usage and provide substantial water cost savings,
as well as extend the tailings life by 4-6 years at an additional cost of $25 million.
In advance of the expansion, mine pre-stripping has increased to access multiple mining fronts to support the expansion
in processing capacity. Consequently, lower grade contact ore stockpiles were processed to support mining activities while
pre-stripping of new mining areas was undertaken. Mining access to higher quality feed is now expected to occur
progressively over FY24 to support the ramp up in production.
In line with production, Mt Marion shipped 62k dmt of 3.8% spodumene concentrate (50% share) over the quarter (SC6
equivalent 40k dmt), up 6% qoq. The average realised spodumene concentrate price was US$3,367/dmt, inclusive of
grade adjustments and product discounts.
MinRes’ 51% offtake share of Mt Marion spodumene concentrate for the quarter of 63k dmt was converted into 4,420
tonnes of lithium battery chemicals under the toll-treating agreement with Jiangxi Ganfeng Lithium Co. Ltd (Ganfeng).
The average achieved price for lithium battery chemicals from Mt Marion was US$50,943/t (exclusive of China VAT).
Pricing is typically finalised based on indices two months after the shipment month. At the end of each period, shipments
not yet finalised are marked-to-market based on estimated pricing. The impact of the price movements for the period are
recorded as an adjustment to revenue. Excluding prior quarter adjustments, the March quarter average achieved price was
US$54,433/t.
Mt Marion FY23 volumes are expected to be at the lower end of spodumene concentrate guidance of 160-180k dmt (SC6
equivalent) and lithium battery chemicals sold guidance of 19.0-21.3kt. The FY23 forecast volume range reflects the impact
of the delay of completing the expansion project as well as mine sequencing, which resulted in the drawdown of contact
ore stockpiles. Accordingly, Mt Marion FY23 spodumene concentrate FOB cost guidance has been revised to $1,200-
$1,250/t (SC6 equivalent) (previously $850-900/t).
Subsequent to quarter’s end, MinRes lodged an initial substantial holder notice disclosing a 19.55% interest in Essential
Minerals (ASX:ESS) (Essential)
6
. Essential’s Pioneer Dome lithium project is approximately 100km from Mt Marion.
MinRes’ interest in Essential is consistent with the Company’s focus on lithium opportunities in the Mt Marion region.
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