{"id":4400,"date":"2024-01-15T18:00:06","date_gmt":"2024-01-15T18:00:06","guid":{"rendered":"https:\/\/economicherald.net\/?p=4400"},"modified":"2024-01-15T18:00:06","modified_gmt":"2024-01-15T18:00:06","slug":"ride-the-cycles-where-does-your-favourite-asx-lithium-project-sit-on-the-cost-curve","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=4400","title":{"rendered":"Ride the Cycles: Where does your favourite ASX lithium project sit on the cost curve?"},"content":{"rendered":"

\u201cIf you are at the low end of the cost curve, all is good\u201d: Joe Lowry
\nWhen metal prices are low, high OPEX can lead to expensive mine shutdowns, cap raises done at a deep discount, or <\/a>bankruptcy
\nHere some emerging lithium project developers and their expected OPEX profiles<\/p>\n

\u00a0<\/p>\n

According to OG battery metals pricing agency Benchmark Mineral Intelligence, average prices for lithium as of January 11 were:<\/p>\n

Carbonate: ~US$14,484\/t
\nHydroxide: ~US$12,900\/t; and
\nSpodumene: ~US$955\/t.<\/p>\n

These prices are down +80% over the past year. At this point in the cycle only the best mines make money.<\/p>\n

\u201cIf you are at the low end of the cost curve, all is good,\u201d says Joe Lowry, one of the world\u2019s foremost lithium market experts<\/a>.<\/p>\n

He is talking about operational expenditure (or OPEX),<\/strong> the\u00a0ongoing costs\u00a0associated with operating a mine.<\/p>\n

OPEX includes both\u00a0direct and indirect costs related to the day to day running of the business; mining, processing, and selling the ore.<\/p>\n

If this number is a lot lower than the price a miner is getting for its metal, \u201call is good\u201d, as Lowry says.<\/p>\n

If not, a miner is probably losing money. Longer term, this could lead to expensive shutdowns, cap raises done at a deep discount, or bankruptcy<\/a>.<\/p>\n

Below are some emerging lithium project developers and their expected OPEX profiles.<\/p>\n

Only use these numbers as a starting point and do your own research.<\/p>\n

Mining project studies, even the most detailed ones, are historically ambitious.<\/p>\n

Recoveries and product grades are often far lower than what miners originally assume, and full ramp up\u00a0 takes longer than expected.<\/p>\n

A recent example is Core Lithium (ASX:CXO)<\/a>, which put the Finniss hard rock mine into mothballs less than a year after its maiden shipment.<\/p>\n

A stage 1 definitive feasibility study \u2013 the most advanced of project studies \u2014 released July 2021 predicted cash operating costs of US$364\/t, and all in sustaining costs of US$441\/t.<\/p>\n

In the September quarter last year CXO\u2019s cash cost was US$1270\/t.
\n\u00a0<\/p>\n

CXO share price chart<\/h2>\n\n

\ufeff<\/span><\/span>\u00a0<\/p>\n

Cash costs<\/strong> include mining\u00a0and processing, but often do not include things like sustaining capital, exploration, corporate overhead, or any other costs not related to production.<\/p>\n

All In Sustaining Cost (AISC)<\/strong> is more representative of a company\u2019s financial health. All In Cost (AIC)<\/strong> is even better.<\/a><\/p>\n

However, unlike gold companies, lithium stocks do not consistently use the same measures. Investors must join the dots.<\/p>\n

There are other things to consider. Producers would receive less than the Benchmark prices mentioned above if they sell:<\/p>\n

An intermediate product (like lithium chloride or DSO);
\nA hydroxide or carbonate that requires further upgrading to battery quality; or
\nA spodumene concentrate below the benchmark grade of 6% LI2O (called SC6).<\/p>\n

With that in mind, can your favourite lithium stock ride the cycles?<\/p>\n

\u00a0<\/p>\n

HYDROXIDE (current price: ~US$12,900\/t)<\/h2>\n

Geothermal lithium play Vulcan (ASX:VUL)<\/a> says its Phase 1 24,000tpa lithium hydroxide operation would boast OPEX of \u20ac4,022\/t<\/strong> (A$6667\/t), making it \u201cone of the lowest on the industry cost curve\u201d.<\/p>\n

This is due to smart use of waste heat to drive the process, VUL says.<\/p>\n

\u201cCombined with offtake agreements with tier one customers, [this] supports stability during payback period, and protection from lithium price fluctuations.\u201d<\/p>\n

European Lithium\u2019s (ASX:EUR)<\/a> small 8800tpa Wolfsberg hard rock-hydroxide project in Austria has OPEX of US$17,016\/t<\/strong>, according to a 2023 DFS.<\/p>\n

The company is currently trying to get its NASDAQ listing via special purpose acquisition vehicle (SPAC) over the line.<\/p>\n

Piedmont\u2019s (ASX:PLL)<\/a> 30,000tpa Tennessee lithium project would purchase spod at market rates from 3rd parties, mostly Sayona\u2019s (ASX:SYA) NAL operation and Atlantic Lithium\u2019s (ASX:A11) Ewoyaa start-up.<\/p>\n

It expects OPEX of US$14,600\/t<\/strong> based on conversion costs of US$2952\/t, plus spod purchase costs of $10,700\/t of hydroxide produced.<\/p>\n

PLL\u2019s 30,000tpa Carolina lithium hydroxide project would have steady-state hydroxide cash costs of US$3,657\/t<\/strong> and AISC of US$4,377\/t<\/strong> for the first 10 years.<\/p>\n

This one is right down the bottom of the cost curve, PLL said at the time.<\/p>\n\n

An updated PFS delivered January 2022 for European Metals\u2019 (ASX:EMH)<\/a> Cinovec hard rock and hydroxide project (49% interest) estimated OPEX at US$3,435\/t<\/strong> after associated tin, tungsten, and potassium sulphate credits.<\/p>\n

A DFS is coming Q1.<\/p>\n

Infinity Lithium (ASX:INF)<\/a> is attempting to build an underground lithium mine\/hydroxide operation next door to the UNESCO World Heritage site of C\u00e1ceres, Spain.<\/p>\n

A 2023 scoping study on the San Jos\u00e9 mine estimated cash costs of US$5,723\/t<\/strong> hydroxide after by-product credits.
\n\u00a0<\/p>\n

ASX Hydroxide Stocks<\/h2>\n\n

\ufeff<\/span><\/span>
\n\u00a0<\/p>\n

CARBONATE (current price: ~US$14,484\/t)<\/h2>\n

Galan (ASX:GLN)<\/a> says its Hombre Muerto West (HMW) and Candelas projects are the highest grade, lowest impurity lithium brine assets in Argentina.<\/p>\n

Under-construction HMW would be in the 1st quartile of industry\u2019s cost curve, with a steady state average cash cost of production of US$3,963\/t<\/strong>.<\/p>\n

But HMW is producing lithium chloride, which would then go to a third party for conversion into battery grade carbonate.<\/p>\n

This means GLN would receive\u00a0 ~72% of the long-term carbonate price, according to its estimates.<\/p>\n

According to a December 2023 PFS Arizona Lithium\u2019s (ASX:AZL)<\/a> 6000tpa LCE Prairie brine project would have average OPEX of US$2,819\/t<\/strong>, making it \u201cone of the lowest cost global projects\u201d.<\/p>\n

However, \u201cat this stage in the development of the Prairie project, Arizona Lithium does not intend to make battery quality lithium chemicals at the well pad,\u201d it says.<\/p>\n

An added conversion charge\u00a0 to get this to battery quality status means AZL would also receive a discount to benchmark prices.<\/p>\n

A December 2023 DFS for Lake Resources\u2019 (ASX:LKE)<\/a> $1.4bn Kachi brine project in Argentina estimates OPEX of ~US$6,050\/t<\/strong> LCE.<\/p>\n

A 2022 DFS on Anson\u2019s (ASX:ASN)<\/a> Paradox brines project in the US envisaged cash costs of US$4,368\/t LCE, which puts it right here on the cost curve:<\/p>\n\n

ASX Carbonate Stocks<\/h2>\n\n

<\/span>\u00a0<\/p>\n

SPODUMENE (Current price: US$955\/t)<\/h2>\n

Remember AVZ (ASX:AVZ)<\/a>?<\/p>\n

The monster Manono lithium-tin project in the\u00a0 DRC had a cash operating cost of US$371\/t<\/strong> for a 6% concentrate, according to a 2020 DFS.<\/p>\n

That would put it right at the bottom of the cost curve, if<\/em> rampant inflation and battles over project control weren\u2019t a thing<\/a>.<\/p>\n

Like AVZ, Leo Lithium (ASX:LLL)<\/a> is having some jurisdictional dramas at the Goulamina project in Mali, where first spod is pencilled in for Q2.<\/p>\n

However, LLL says US$365\/t<\/strong> AISC SC6 provides solid profit at conservative long term pricing of ~US$900\/t.<\/p>\n

A 2023 PEA (equivalent of a scoping study) on Latin Resources\u2019 (ASX:LRS) +70Mt Salina hard rock project in Brazil envisaged AISC of US$536\/t.<\/strong><\/p>\n

A DFS is due late H1 this year.<\/p>\n

Global Lithium\u2019s (ASX:GL1)<\/a> Manna project, 100km east of Kalgoorlie, has a cash cost of US$688\/t<\/strong> for a 5.5% Li2O spodumene concentrate, according to a February 2023 scoping study.<\/p>\n

The company has jumped straight to a DFS, which is in its final stages.<\/p>\n

At the 207,000tpa Seymour project in Canada, Green Technology Metals (ASX:GT1)<\/a> predicts cash costs of US$741\/t<\/strong> for 5.5% spod concentrate, according to a late 2023 PEA.<\/p>\n

A DFS is now underway.<\/p>\n\n

<\/span>\u00a0
\n<\/span><\/p>\n

The post Ride the Cycles: Where does your favourite ASX lithium project sit on the cost curve?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

\u201cIf you are at the low end of the cost curve, all is good\u201d: Joe Lowry When metal prices are low, high OPEX can lead [more…]<\/a><\/p>\n","protected":false},"author":0,"featured_media":4401,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-4400","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\nRide the Cycles: Where does your favourite ASX lithium project sit on the cost curve? - Economic Herald<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/economicherald.net\/?p=4400\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Ride the Cycles: Where does your favourite ASX lithium project sit on the cost curve? 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