Core Lithium flags curtailment of mining operations and pauses work on underground expansion at Finniss project as lithium price drop bites, down 20%+
\nSpodumene concentrate was the worst performing product in the lithium supply chain as
\nPrices have fallen 80% this year and 40% since October<\/p>\n
The NT\u2019s only spodumene producer Core Lithium (ASX:CXO)<\/a> has paused work on a new underground deposit and could curtail mining operations altogether in the strongest hint yet tumbling lithium prices are hurting local producers.<\/p>\n First, some context.<\/p>\n Lithium prices have vastly underperformed in 2023, falling from upwards of US$8000\/t to US$1100\/t in around 12 months.<\/p>\n That\u2019s extraordinary, far eclipsing the magnitude of the fall in the 2018-2020 Lithium Winter although prices remain upwards of double the chilling lows that saw producers like Alita Resources and Altura Mining hit the wall.<\/p>\n While there have been a couple of price dives in 2023 amid a situation of sudden oversupply for the Chinese conversion market \u2014 with lithium raw materials supply outpacing still solid EV sales growth \u2014 a number of industry players have thought chemical prices would bottom at between US$20,000-25,000\/t.<\/p>\n READ: The Shape of Lithium to Come: Ken Brinsden bangs the drum about the next 10 years of lithium<\/a><\/p>\n That would be because low grade lepidolite conversion plays in China \u2014 many of them high up on a rapidly steepening cost curve \u2014 have been loss-making for a while. As have non-integrated companies processing third party Australian spodumene.<\/p>\n But prices have kept trending lower. The latest Benchmark Mineral Intelligence assessment lithium price assessment saw its index \u2014 incorporating prices for lithium carbonate in China, Asia and North America, lithium hydroxide and spodumene on contract and spot sales \u2014 down a whopping 17.3% between November 29 and December 13.<\/p>\n The largest fall was in spodumene concentrate out of WA, off 22% as the lagging raw material finally caught up to the price drops of its downstream cousins.<\/p>\n \u201cSeveral buyers have cancelled their orders from battery cell manufacturers during December under subdued downstream demand,\u201d Benchmark\u2019s analysts said.<\/p>\n \u201cLithium producers in the ex-Asia market continue to shift notable volumes of material at discounted rates, in a bid to achieve their annual sales targets before the end of the year.<\/p>\n \u201cContract prices for spodumene concentrate sustain their notable decline, in a delayed response to the downturn in lithium chemicals prices.\u201d<\/p>\n According to Benchmark spodumene prices are down 79.7% YTD.<\/p>\n \u00a0<\/p>\n Oh yes, Core Lithium opened the Finniss mine earlier this year with a production forecast amended to be a little over half of the original 175,000tpa capacity envisaged in a previous feasibility study.<\/p>\n As with many lithium producers, recoveries have been a challenge early on and low grade fines it can\u2019t process through a dense media separation circuit have been sold to end users for processing on their end.<\/p>\n With prices as they are now, that\u2019s not feasible, and MD Gareth Manderson\u2019s bullishness about getting the mine up and running quicker at a lower production rate at Diggers in August is looking less impressive.<\/p>\n \u201cI think the speed to market in a reasonable pricing environment is a reasonable offset for working through some of these issues,\u201d Manderson said in August when spodumene prices remained around US$3450\/t.<\/p>\n \u201cAnd I think it\u2019ll actually start to pave the way for the business moving forward as well. So, you know, that really does set us up well for (underground deposit) BP33, the second mine.\u201d<\/p>\n It has now paused early works at BP33 \u2014 expected to cost around $50 million \u2014 and flagged the \u201ctemporary curtailment of mining operations, commercial solutions and reductions in exploration and other discretionary expenditures\u201d as part of a strategic review of its operations near Darwin.<\/p>\n It noted the price of spodumene concentrate had cratered 80% this year and 40% since the end of October.<\/p>\n Core delivered maiden NPAT of $10.8 million for FY23 but still had to dip into the market in August for $111 million in fresh funds via a placement and share purchase plan.<\/p>\n It had $202.1m in cash as of September 30, a decent buffer if Core does have to curtail operations or even shut down, but had cash operating unit costs of $1889\/t (currently US$1284) in the first quarter of FY24.<\/p>\n The wet season can be a complicating factor for miners in the north of the country, though Core says it has seen operations steady despite above average rainfall in November, shipping 20,538t of concentrate and 32,260t of fines in October and November.<\/p>\n \u00a0<\/p>\n But the fall in lithium prices means it will need to tighten the belt, with fines shipments held in current market conditions.<\/p>\n \u201cThe Company has now been producing concentrates for 10 months and has seen improvement in mine productivity and plant performance over that period,\u201d Core said. <\/p>\n \u201cHowever, the current decline in the spodumene price has caused the Company to investigate a range of options to lower costs and increase productivity.<\/p>\n \u201cOver recent months, the Company has built a significant ROM (run-of-mine) stockpile and will continue processing ore and making spodumene concentrate during the wet season.<\/p>\n \u201cThe review will prioritise preserving business value and future options. Given the difficulties associated with mining and construction in the wet season and the focus on reducing expenditure, BP33 early works have been suspended.\u201d<\/p>\n Core shares were down over 22% with upwards of 50 million shares changing hand, sinking the price of its stock to 25.7c. It is now down around 75% YTD, and ~85% from its all time high of $1.67 in November last year.<\/p>\n Goldman Sachs analysts led by Hugo Nicolaci \u2014 who had a 31c price target and sell rating on Core Lithium this morning \u2014 warned the decision to push back early works at BP33 could risk Core\u2019s outlook from FY25, with the underground development intended to make up for depletion in the Grants open pit.<\/p>\n \u201cWe have highlighted an increased risk that funding from existing cash\/operating cash flows may be insufficient to fund BP33 development, and that possible external funding may take time and be at high rates,\u201d they said in a note this morning. <\/p>\n \u201cWe also note that deferring exploration and pre-stripping spend may be insufficient to keep the business in positive FCF (after the equity raise) on our estimates in FY24, while deferring early works on BP33 development increases the risk of a gap in production in FY25.\u201d<\/p>\n The full scope of cost savings is expected to be delivered in its December quarter update in January after discussions with contractors and suppliers are completed.<\/p>\n Core sells spodumene via offtake deals to Chinese converters Yahua and Ganfeng but decided not to pursue a separate supply deal with Tesla.<\/p>\n \u00a0<\/p>\n The timid positivity around other lithium producers \u2014 in the hope the market has found some sort of bottom \u2014 has continued, with Pilbara Minerals (ASX:PLS)<\/a>, Mineral Resources (ASX:MIN)<\/a> and IGO (ASX:IGO)<\/a> all in the green this morning.<\/p>\n Materials stocks rose 0.21%, with rare earths producer Lynas (ASX:LYC)<\/a> and coal miner Whitehaven Coal (ASX:WHC)<\/a>, as well as iron ore giant Fortescue (ASX:FMG)<\/a> also among the winners.<\/p>\n Iron ore futures rose 0.47% to over US$138\/t.<\/p>\n <\/span><\/p>\n The post Ground Breakers: The lithium price rut hits home as Core sinks on Finniss update<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"What about Core?<\/h2>\n
Down 75% YTD<\/h2>\n
And on the markets<\/h2>\n