MinRes insists its lithium mines are still profitable

Updated Jan 25, 2024 – 6.21pm,first published at 10.38am

Mineral Resources boss Chris Ellison expects lithium prices to keep falling into 2024, but is standing by his strategy to boost mine production and “land bank” exploration projects in Western Australia.

The mining billionaire said MinRes’ three lithium mines in WA remained profitable and cash flow positive despite the sharp fall in prices that has rocked the lithium sector.

Mineral Resources boss Chris Ellison. Trevor Collens

The company will slash production costs at its biggest mines in the next six months amid market forecasts the lithium price will further depreciate, putting high-cost operations at risk in Australia and in other jurisdictions, MinRes told the market on Thursday.

ASX-listed Sayona Mining separately said on Thursday that it was reviewing the future of its Quebec lithium mine and shedding jobs.

Analysis published by Citi in December implied two MinRes mines were in danger of slipping into loss-making territory as lithium prices soften.

MinRes said on Thursday that Mt Marion, owned in partnership with China’s Ganfeng; Wodgina, co-owned with Albemarle; and its newly acquired Bald Hill were all profitable mines at current prices.

“All three mines are operating profitably at today’s prices,” Mr Ellison said on a call with analysts.

“Those prices are going to continue to decline over the next three to six months.”

Mr Ellison added that talks with its partners Ganfeng and Albemarle indicated inventories were declining, and that the market was nearing a bottom.

He said MinRes’ history in lithium showed it had operated at prices lower than $US600 a tonne for longer than when they were at $US1000 a tonne.

“We used to make money at $US600, and we can still do that.”

MinRes is one of the companies attending a lithium crisis meeting in Perth on Thursday convened by Resources Minister Madeleine King.

The meeting comes after Core Lithium shut its operation in the Northern Territory, New York-listed Albemarle scaled back its investment in WA, and banks this week withdrew a $760 million loan to Liontown Resources which is scrambling to complete Australia’s next big lithium mine.

Undeterred by the downturn, MinRes has pursued a billion-dollar investment spree on multiple, early-stage lithium exploration projects in WA. In the past week alone, MinRes boosted its stake in Kali Metals, where Rich Lister Mr Ellison is a major shareholder through one of his private companies, to 14 per cent from 9.97 per cent.

He is on the hunt for more.

“Historically, the largest operators (in mineral commodities) have land banked quality tenements. We’ve been doing that. We’re building a large portfolio of high-quality lithium projects, and we are in the world’s most ethical mining jurisdiction,” he said.

Azure exit

That being so, MinRes confirmed it will sell its stake in takeover target Azure Minerals to the Hancock-SQM bid. “We do have an investment in Azure of circa $250 million,” chief financial officer Mark Wilson said. “We intend to sell into that this half.”

Its participation means the joint bid is almost certain to succeed.

MinRes told investors it fetched $US738 a tonne for 4.2 per cent-grade spodumene concentrate produced at Mt Marion in the December quarter down from $US1870 a tonne in the September quarter.

It said production costs in the December half year were $548 a tonne, and below cost guidance.

The company did not provide numbers around Wodgina in its quarterly results but cited production costs in the first half of $845 a tonne. Free-on-board costs are expected to fall to $550 a tonne by September as feed quality improved and the strip ratio at Wodgina declined.

It expects to cut production costs at Mt Marion to $500 a tonne by July.

In the company’s mining services division, volumes rose 9 per cent quarter-on-quarter to 72 million tonnes. In iron ore, shipments jumped 23 per cent to 4.8 million tonnes, and MinRes said its Onslow Iron project remained on track to start production in June.