Australian Mining Landscape: A Year of Shifts and Contests

Abstract:

This report provides an in-depth exploration of the Australian mining landscape, specifically focusing on the transformative events anticipated in 2024. With a spotlight on SQM's Mt Holland and Liontown's Kathleen Valley projects, collectively contributing 100,000 tons of lithium salt equivalent, the report sheds light on the equity dispute surrounding Liontown involving Australia's wealthiest woman, Hancock, and Albemarle's acquisition. Additionally, it delves into Hancock's interception of SQM's Andover project, joint bidding for Azure, and the ownership transfer of Bald Hill to MRL, set to recommence production in 2024.

1. Introduction:

The Australian mining sector is poised for a pivotal year with the launch of SQM's Mt Holland and Liontown's Kathleen Valley projects, collectively adding 100,000 tons of lithium salt equivalent to the market. These ventures, among the largest and most advanced in Australia, with proven reserves and established infrastructure, mark the onset of a transformative period. However, the Liontown venture is entangled in an equity dispute, injecting intrigue into Australia's mining narrative. Additionally, Hancock's strategic maneuvers in intercepting SQM's projects and the ownership transfer of Bald Hill signify a dynamic landscape characterized by shifting ownership and production dynamics.

2. Australia: A Key Global Supplier of Lithium Ore

Australia stands out as a superior lithium ore resource hub, hosting major lithium spodumene deposits globally. Boasting a total lithium resource of 7.9 million tons and reserves of 6.2 million tons, the country features prominent lithium mining projects, including Greenbushes, Pilgangoora, Marion, and Wodgina. These projects lead globally in both quantity and quality, with Australia contributing approximately 47% of the world's lithium production in 2022. Geographically, Pilgangoora and Wodgina are strategically positioned near the northern port of Hedland, catering primarily to China and South Korea, while projects in the south, such as Greenbushes, Mt Holland, Mt Marion, and Mt Cattlin, utilize ports like Bunbury and Esperance for transportation. Australia's lithium mining industry excels globally in endowment and production capacity planning, with the Greenbushes mine, in particular, standing out for its unparalleled lithium resource and reserves, high grade, and well-planned production capacity.

2.2 Pilgangoora Project: Planned Concentrate Capacity of 1 Million Tons

The Pilgangoora project, housing one of the world's largest hard-rock lithium-tantalum deposits, stands as a significant global source of lithium. Discovered in 1905, Pilgangoora's lithium value gained full recognition in 2014. Pilbara Minerals, in its exploration phases from 2014 to June 2021, uncovered updated mineral resources of 3.509 million tons of lithium oxide with an average grade of 1.14%. The updated total mineral reserves stand at 1.9 million tons of lithium oxide with an average grade of 1.18%. Pilgangoora's Pilgan and Ngungaju sections contribute to lithium spodumene concentrate production. The Ngungaju project, acquired in 2021 by Pilbara Minerals, underwent upgrades in the third quarter of 2022, boosting lithium spodumene concentrate production capacity to 180,000-200,000 tons per year. The Pilgangoora project achieved a historic high in lithium concentrate sales in the fourth quarter of 2022, with total production reaching 517,900 tons for the year. The ongoing expansion of the Pilgan plant is set to increase annual lithium spodumene production to 640,000-680,000 tons upon completion. In the first quarter of 2023, the company aims to make the final investment decision for the P1000 project, targeting a capacity of 1 million tons per year by the end of 2023 or 2024.

2.3 Mt Cattlin Facing Depletion Risks

The Cattlin project, owned by Allkem, began production in 2016, transporting lithium concentrate to Esperance port for export. As of June 30, 2022, revised ore reserves decreased by 28% to 5.8 million tons with a grade of 0.98%. Continuous production decreases and a reduction in concentrate grade were observed in 2022, with the fourth quarter seeing a 68.6% year-on-year decrease. The total production for 2022 was 107,400 tons, a 53.3% decline, influenced by disrupted Australian equipment supply, labor shortages, delayed pre-stripping of new ore bodies, and reduced recovery rates. The company plans to produce 140,000-150,000 tons of lithium concentrate in the 2023 fiscal year, but resource constraints indicate a potential depletion in five years.

2.4 Mt Marion Expansion Delayed

The Mt Marion lithium mine, owned by MRL and Ganfeng, faced challenges in the 2022 fiscal year. Sales were below guidance, with the lithium concentrate total shipment reaching 442,000 tons against an earlier guidance of 450,000-475,000 tons. Pandemic-related disruptions, decreased ore extraction, and a decline in high-grade ore production contributed to the lower-than-expected production. Expansion construction is slated for completion in April 2023, with full production in July, reaching a capacity of 900,000 tons of lithium concentrate. The project aims to address the decrease in the original ore grade, optimizing production for the coming years.

2.5 Wodgina: A Major Incremental Project in 2023

The Wodgina mine, jointly developed by Mineral Resources and ALB, is located in the northern Pilbara region. After a temporary shutdown due to market conditions in 2019, Wodgina resumed operations in 2022. The first production line, with a capacity of 250,000 tons, resumed in May 2022, and the second line started in July. Production from the third and fourth lines will be initiated based on market conditions. The lithium concentrate production for the fourth quarter of 2022 at Wodgina was 92,000 tons, with a shipment volume of 95,000 tons. With a shipment guidance of 380,000-420,000 tons for the 2023 fiscal year, Wodgina is poised to contribute significantly to the market, showcasing its potential as a major incremental project.

2.6 Finniss: Lithium Concentrate Production in 2023

The Finniss project, owned by Core Lithium, is located near Darwin port and has an estimated ore resource of 18.9 million tons. The project faced delays in production, shifting from the fourth quarter of 2022 to the first half of 2023. Core Lithium's investment of around AUD 89 million is directed at building a 1 million ton per year beneficiation plant. The project aims to produce 175,000 tons per year of lithium concentrate (SC6) over a 12-year mining period, with an estimated average cash cost of USD 423 per ton. The successful auction of the first spodumene ore in October 2022, with a transaction price of USD 951 per ton, indicates the project's readiness for production in early 2023.

2.7 Other Lithium Mines

Kathleen Valley: Owned by Liontown Resources, this project with substantial potential has received its final investment decision in June 2022. With an estimated ore resource of 156 million tons and a Li2O grade of 1.4%, the project is set to contribute significantly to lithium concentrate capacity, reaching 511,000 tons per year (SC6) after six years.

Mt Holland: The Mt Holland-EarlGrey deposit, jointly owned by SQM and Wesfarmers, is a sizable undeveloped mine with vast potential. Anticipated to produce an average of 383,000 tons of lithium concentrate per year, the project is expected to commence production in the second half of 2024.

Buldania: Liontown's exploration project in the Buldania region, with an estimated mineral resource of 15 million tons at 1.0% Li2O, has been actively pursued since 2018. Its strategic location with proximity to infrastructure positions it as a promising venture.

Marble Bar and Manna Lithium Projects: Global Lithium's exploration efforts at Marble Bar and Manna projects have shown significant progress. The December 2022 update reflects increased lithium mineral resources, indicating positive developments in these projects.

3. Equity Dynamics and Strategic Moves in Australia Market

Hancock's aggressive pursuit of a stake in Liontown, entangled in an equity dispute with Albemarle, adds complexity to the landscape. The dispute, currently in court, involves Hancock seeking to block Albemarle's acquisition or force the sale of its share. This contest underscores the intense competition within Australia's lithium sector.

4. Operational Changes and Production Challenges

Hancock's involvement in conflicts extends to SQM, where a dispute over the Andover project is ongoing. Despite SQM acquiring a 50% interest in Andover from Azure Minerals in 2023, Hancock claims a prior agreement with Azure for joint development. The competition between Hancock and SQM for the remaining 50% stake in Azure intensifies the strategic battles in the Australian lithium sector. Meanwhile, MRL's acquisition of Bald Hill from Alliance Mineral Assets positions it as a key player, aiming to resume production in 2024 with an annual output of 155,000 tons of concentrate. MRL's strategic move extends to becoming a major shareholder of DELTA, a leading battery manufacturer, enhancing its position in downstream markets and technologies.

5. Strategic Ownership and Emergence of New Players

While new projects gain momentum, existing mines grapple with operational challenges. Greenbushes, the world's largest lithium mine, jointly owned by Tianqi Lithium and Albemarle, faces oversupply and low prices, leading to considerations of reducing production and stockpiling concentrate. The Finniss mine, the first in the new project cycle, has temporarily suspended operations at its Grants open-pit mine and delayed the development of its BP33 mine.

Conclusion:

The year 2024 represents a pivotal moment for the Australian lithium industry, unfolding its full potential and reshaping the global supply chain. However, it also signals the conclusion of a boom period as new projects conclude and existing mines face depletion. The coming years will be critical for securing exploration rights and developing new resources amidst intensifying competition and growing demand. The Australian mining sector must adapt to evolving market dynamics and geopolitical factors while upholding its competitive edge and environmental standards.