Technical Analysis of Spodumene Operations (3-6% Li2O Grade): Production Requirements and Cost Economics Based on FY24 Operational Data

Date: October 26, 2024

Executive Summary

This report analyzes the operational and economic aspects of major lithium mining operations, focusing on grade quality, production volumes, and cost economics. The analysis covers three primary operations: Mt Marion, Wodgina, and Bald Hill, with a particular emphasis on their spodumene production and grade qualities.

1. Operational Overview

1.1 Production Assets Summary

1.2 Grade Quality Distribution

- High Grade (>5%): Wodgina (5.6%), Bald Hill (5.2%)

- Medium Grade (4-5%): Mt Marion (4.1%)

2. Production Economics Analysis

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Figure 1. Production Volume and Grade Comparison

2.1 Grade Impact on Resource Requirements

Based on the provided charts, we observe a clear inverse relationship between ore grade and resource requirements:

Figure 2. Grade vs Resource Requirements and Cost

Resource Requirements for 1 tonne Li?CO? Production:

- At 3.0% grade: ~18.0 tonnes ore

- At 4.0% grade: ~12.5 tonnes ore

- At 5.0% grade: ~10.0 tonnes ore

- At 6.0% grade: ~8.0 tonnes ore

Figure 3. Production Share Distribution

2.2 Cost Analysis by Grade

Production costs demonstrate significant variation based on ore grade:

Cost Correlation (per LCE):

- 3.0% grade: ~8.8 million yuan/LCE

- 4.0% grade: ~7.8 million yuan/LCE

- 5.0% grade: ~7.3 million yuan/LCE

- 6.0% grade: ~7.0 million yuan/LCE

3. Operational Efficiency Analysis

3.1 Production Efficiency Metrics

Production Efficiency Score = (Grade % × Production Volume) / FOB Cost

Efficiency Rankings:

1. Wodgina: High efficiency despite higher FOB costs due to superior grade

2. Mt Marion: Good efficiency with lower FOB costs compensating for lower grade

3. Bald Hill: Incomplete assessment due to missing FOB data

3.2 Scale Economics

Total production capacity demonstrates significant market presence:

- Combined production: 486k dmt SC6

- Market share implications: Substantial production volume indicates strong market position

4. Investment Implications

4.1 Strengths

- High-grade operations (Wodgina, Bald Hill) offering superior resource efficiency

- Significant production scale across operations

- Competitive FOB costs at Mt Marion despite lower grade

4.2 Considerations

- Grade quality's impact on production costs

- Scale advantages in larger operations

- Resource efficiency improvements at higher grades

4.3 Risk Factors

- Cost variability between operations

- Grade quality consistency

- Production volume sustainability

5. Strategic Recommendations

5.1 Investment Priorities

1. Primary Focus: High-grade operations (Wodgina, Bald Hill)

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2. Secondary Focus: Cost-efficient operations (Mt Marion)

?? - Strong operational efficiency despite lower grade

?? - Competitive cost structure

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5.2 Operational Optimization

- Focus on maintaining high-grade production

- Implement cost optimization strategies

- Explore grade improvement opportunities

6. Conclusions

The analysis reveals strong correlation between grade quality and operational efficiency. Higher grade operations (>5%) demonstrate superior economic characteristics, while efficient cost management can compensate for lower grades. Investment focus should prioritize high-grade operations while maintaining cost-efficient production across all assets.

Key Investment Takeaways:

1. Grade quality significantly impacts resource requirements and costs

2. Operational scale provides market advantages

3. Cost management remains crucial regardless of grade

4. Portfolio approach balancing grade quality and operational efficiency is optimal

7. Future Outlook

- Continued focus on grade optimization

- Cost management initiatives

- Production scale advantages

- Market position strengthening

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Note: All analyses are based on provided data and current market conditions. Future performance may vary based on market dynamics and operational changes.