Lithium developers have felt the wrath of mining\u2019s boom and bust cycles after prices tumbled more than 80% in a year
\nBut Patriot Battery Metals shares surged 15% on Thursday after former Pilbara Minerals MD Ken Brinsden made a stunning return as the Canadian explorer\u2019s CEO
\nHear why Brinsden\u2019s back and why he thinks Patriot\u2019s Corvette could be the next lithium mega project<\/p>\n
Lithium sentiment has been torched over the past 15 months as prices for spodumene concentrate have tumbled from over US$8000\/t to just US$850\/t yesterday.<\/p>\n
The biggest, lowest cost miners appear to be shielded for now.<\/p>\n
Pilbara Minerals (ASX:PLS)<\/a> and Mineral Resources (ASX:MIN) <\/a>say their mines are still turning a profit \u2014 MinRes boss Chris Ellison thinks it would take prices under US$600\/t to lose his company\u2019s hard-earrned.<\/p>\n But the magnitude and speed of the pratfall has devastated the smaller end of the market.<\/p>\n Sayona Mining (ASX:SYA)<\/a> on Thursday announced 14 redundancies as part of an ongoing operational review at its North American Lithium operations in Canada.<\/p>\n Liontown\u2019s (ASX:LTR)<\/a> torpor since the collapse of its planned $6.6 billion takeover by Albemarle last year got worse last week, its shares around two-and-a-half year lows after a revision to pricing forecasts by Wood Mackenzie were blamed for a rug-pull on a $760 million debt finance package for its Kathleen Valley mine.<\/p>\n That\u2019s not to mention Core Lithium (ASX:CXO)<\/a>, which has paused mining and will only process stocks to save costs at its Finniss mine in the NT.<\/p>\n Investors in lithium developers are in need of a hero. And retail investors found it on Thursday when Patriot Battery Metals (ASX:PMT)<\/a> announced its non-executive chairman Ken Brinsden would move from Perth to Montreal to take over as the C$1 billion dual-listed stock\u2019s CEO and president.<\/p>\n Brinsden\u2019s time at Pilbara Minerals, where he stood aside for Dale Henderson in 2022, saw the company ride the cycles through the first electric vehicle-led lithium boom in 2016 through the \u2018Lithium Winter\u2019 of 2018-2020 and into the last boom that made the company one of the largest and most profitable miners in the ASX 50.<\/p>\n His role in the last lithium boom went beyond that into price discovery (and some would say setting) himself, with Brinsden\u2019s PLS charting the boom in spot prices by selling material to hungry chemical converters via its online Battery Material Exchange auction platform.<\/p>\n Now he\u2019s looking to repeat the feat with Albemarle-backed Patriot, which inspired a rush into the James Bay region of Quebec with its Corvette discovery, now North America\u2019s largest hard rock lithium deposit with an inferred JORC resource of 109.2Mt at 1.42% Li2O.<\/p>\n We caught up with Brinsden shortly after his appointment was announced to talk about his return to management and his thoughts on what could end the lithium industry\u2019s cycle of boom and bust.<\/p>\n \u00a0<\/p>\n \u201cThe conversations got more serious in the latter part of last year and between myself, the balance of the board and Blair we started to talk about what\u2019s required for the next steps in the company. <\/p>\n \u201cBetween especially Blair, myself, and Pierre our newly minted chair, all agreed that it was a constructive step to establish the local leadership and take a step up locally in the Quebec community and show that we\u2019re deadly serious about the development of the project and engaging with all the stakeholders. <\/p>\n \u201cFrom my personal point of view, it\u2019s very much the case that the project has got incredible merit and its scale is going to be, I think, a key contributor to the development of this new North American and European supply chain so I really couldn\u2019t help myself and felt like I had to be a part of it.\u201d<\/p>\n \u00a0<\/p>\n \u201cI really enjoy the building piece, Josh.<\/p>\n \u201cI guess I\u2019ve learned over the course of my career that\u2019s the stuff that really motivates me \u2014 building the team and creating the culture in the company that\u2019s going to help deliver what we think is a pretty amazing project. <\/p>\n \u201cSo, with that as a backdrop, and then seeing the motivation in Quebec itself to build this industry almost from the ground up, just makes me want to be a part of it. The provincial government here is deadly serious about the lithium-ion battery supply chain and they\u2019re matching that with a combination of dollars in support of the development in the industry, but also in kind. <\/p>\n \u201cThe political will and the motivation to get on with it, make decisions, attract capital, attract intellectual capital, and they\u2019re getting the runs on the board. <\/p>\n \u201cThey\u2019ve got POSCO, they\u2019ve got GM, they\u2019ve got LG, they\u2019ve got Northolt. And we would argue soon to have the Corvette project so what more could you want? It\u2019s a pretty amazing picture over here.\u201d<\/p>\n \u00a0<\/p>\n \u201cIt\u2019s a cycle that perhaps no one unexpected in light of the heavy prices that had been achieved, especially in the China market. I\u2019ve got to say, though, that China has the effect of being a bit of a magnifying glass. It does it on the way up but equally, it does it on the way down, and it\u2019s not constructive to sentiment. <\/p>\n \u201cThat sort of volatility the average equity investor kind of hates, in a manner of speaking, especially if they\u2019re on the wrong side of the trade. A better proxy for the health in the industry, I think is to watch what\u2019s happening in pricing in Japan and Korea, where pricing never got as high as it did in China.<\/p>\n \u201cSo, to me, the obsession with China and the volatility there is not a healthy paradigm for the industry. And by the way it\u2019s another one of the reasons why the supply chains around the world need to continue to diversify because China dominates the market. <\/p>\n \u201cThey\u2019re producing 80% of the world\u2019s value-added lithium chemicals. So it\u2019s really got to be broken open by the Western world and especially in North America. So I\u2019m really motivated to help make that happen and we think we\u2019ve got a significant project that\u2019s going to underwrite a lot of capacity in North America.\u201d<\/p>\n \u00a0<\/p>\n \u201cWell, yes and no, perhaps not to the degree that I think you\u2019re thinking about because Australia and Western Australia has attracted quite a bit of capital when you think about the plants that have been built or are being built. The next big mover is the Koreans. <\/p>\n \u201cSo I would expect them to deploy more capital, exercising their strength in the industry, and actually also the engineering and technology piece that\u2019s a key part of those value added lithium chemical plants and making it happen elsewhere around the world. <\/p>\n \u201cSo it\u2019s already happening in Korea, POSCO is building there. I believe there\u2019s quite a few Korean groups looking at North American facilities for the value added lithium chemicals. When it\u2019s all said and done, they\u2019re probably the next big mover beyond China. <\/p>\n \u201cDoes that translate to somehow Australia loses? I don\u2019t think so, it\u2019s not quite like that. I actually think Western Australia has done pretty well to get to the position it\u2019s in and even attract the capital that relates to those plants that are under construction. That\u2019s quite different compared to where Australia has been historically in the value added space beyond just mining. <\/p>\n \u201cCould it be more over time? My bet is that it\u2019s more akin to where Pilbara Minerals is headed with their midstream products. I actually think that\u2019s quite a good solution for West Australian producers because you don\u2019t have to invest quite as much capital as what\u2019s required for the very sophisticated high purity lithium chemicals plants. But you still get a lot of benefits in value added product and price, and leaving a lot of waste and a lower carbon footprint in the supply chain. <\/p>\n \u201cSo for all those reasons, I think it\u2019s a logical solution, especially for scale in Western Australia. When we think about the development of Canada, it probably looks a bit more like what\u2019s already happening in Western Australia. There\u2019ll be several chemical plants and several mines and they should all work there.\u201d<\/p>\n \u00a0<\/p>\n \u201cIt\u2019s torture, isn\u2019t it? Unfortunately, we\u2019ve seen this movie before. It\u2019s all part of the cycle, isn\u2019t it? Now, the good news is that a lot of the mines had money in the bank so it doesn\u2019t mean that they\u2019re going under but it does it mean that they slow production or cut cost, you\u2019d say that\u2019s an obvious conclusion to draw. <\/p>\n \u201cBut again, I just make the point. If you\u2019re mining spodumene and it\u2019s going to China you suffer from whatever volatility is derived in the China market. But ex-China, there is still a very healthy margin for lithium chemicals. <\/p>\n \u201cSo what the Western world needs to do is get serious about the development of these alternative supply chains that are more stable and more reliable. That\u2019s actually what needs to happen in support of a healthy lithium-ion battery and EV supply chain. The very fact that the whole world is reliant on China is a problem and needs to be solved.\u201d<\/p>\n \u00a0<\/p>\n \u201cThat\u2019s absolutely right. More stability in pricing will translate to a healthier ecosystem. You won\u2019t have those massive run ups in price to create super profits but equally you won\u2019t have the crash or the lithium winter that emerges when China thinks the price should be US$10, or US$12 or US$13,000 a tonne.\u201d<\/p>\n \u00a0<\/p>\n \u201cI think the evidence points to exactly that point even today because that\u2019s the distinction I guess I\u2019m drawing between lithium chemicals being bought in Japan and Korea. They\u2019re not the lowest of lows like they are in China today, but equally, they didn\u2019t attract the highest of highs that China did. <\/p>\n \u201cMy contention would be look at what\u2019s happening there and that\u2019s not a bad proxy for the environment that can be established in North American markets and can be established in European markets. It\u2019s just that the industry has to invest more capital there to facilitate that aim.<\/p>\n \u201cAnd of course, the spin off that you also achieve is independence in your supply chain. And all of those things in my mind are absolutely key to the survival of the Western car industry and then a little bit further upstream battery industries. If they continue to remain reliant on China, that will be a problem as the industry migrates towards EVs and away from ICEs.\u201d<\/p>\n \u00a0<\/p>\n \u201cWe\u2019re doing a bit of both actually because we still need to progress the engineering studies. So the engineering studies rely on a reserve. You need to have printed your reserve and that becomes the the key economic backbone of your subsequent feasibility studies. So we have to do some infill drilling. <\/p>\n \u201cBut we\u2019ve got a pretty big program going on with up to 10 rigs and I think you could say it\u2019s roughly 50-50.<\/p>\n \u201cHalf of the rigs are doing infill. That is going to ultimately create a reserve that supports our engineering studies and then the other 50% of the rigs are either doing the equivalent of geotechnical work or water work, or exploration because we have a lot of confidence in continuing to grow the endowment and the resource at the project. <\/p>\n \u201cIt\u2019s a pretty amazing piece of geology, so we\u2019re keen to show what it can deliver.\u201d<\/p>\n \u00a0<\/p>\n \u201cI\u2019ve taken some heart actually from the time I\u2019ve spent over here, understanding the way the system works, and I\u2019ve somewhat jokingly said it\u2019s a French-speaking WA because the mining industry is a big part of the economy here. <\/p>\n \u201cIt\u2019s well supported by government and mostly, I think, by the community. I wouldn\u2019t make the comparison between say Quebec or even New South Wales and Victoria and say it\u2019s like that. It\u2019s much more like Western Australia where the Average Joe understands the significance of the mining industry and what it creates in terms of economic benefit.<\/p>\n \u201cWe did Pilgangoora and it was two years from submission of our environmental approvals documents to the commencement of construction. We\u2019ve mapped our pathway through to the commencement of production and it\u2019s going through the process of checking now that we\u2019ve submitted our documents with Government and commenced in earnest our engagement with the Cree. <\/p>\n \u201cAnd we think that process is about three years in Quebec, so is it really that different? I\u2019m not sure it is, Josh, I think I think it\u2019s a pretty good jurisdiction to be building a mine in. Put it this way. I\u2019d much rather be building a mine in Quebec than in Victoria or New South Wales in Australia.\u201d<\/p>\n \u00a0<\/p>\n \u201cI don\u2019t think that\u2019s a good example because there\u2019s a period of time there in 2019, 2020 and 2021, when nobody was spending a cent on lithium projects to see them progress. And it\u2019s kind of convenient now to point to the approvals process and say \u2018oh, that was an issue\u2019. I don\u2019t think that argument really holds water.\u201d<\/p>\n \u00a0<\/p>\n \u201cI do think it needs to be looked at through a different lens. There\u2019s mega projects in the lithium world, and then there\u2019s kind of the rats and mice projects. <\/p>\n \u201cI really want to put Corvette in the category of being one of those mega projects, in which case it attracts a different layer of capital to its development. In Western Australia, there\u2019s really the big four \u2014 there\u2019s Greenbushes, Wodgina, Pilgangoora and you might put Mt Holland in there, the SQM-Wesfarmers joint venture, and then there\u2019s a reasonably significant step down. <\/p>\n \u201cThey\u2019re the projects that have the 600,000-1Mt equivalent spodumene production capacity. The analogy I often use is to say they\u2019re like the Mining Area C or Yandis of the iron ore world \u2014 mega mega mines. <\/p>\n \u201cSo we think that we\u2019ve got one of them in Corvette. Now, we have to do more drilling, of course, and we intend to. But all the evidence is there to point to it being a significant project over time, and that will attract a different pool of capital. <\/p>\n \u201cI guess the other layer to throw in there too is to say you\u2019ve only got to look at the extent to which Quebec itself has spent its own money to support the development of this lithium-ion supply chain and they\u2019ve now spent billions attracting key project players to the development of the industry. <\/p>\n \u201cSo I would argue there\u2019s another pool of capital there that can help realise the potential in a project like Corvette as well.\u201d<\/p>\n \u00a0<\/p>\n \u201cWith EV sales at let\u2019s say 30% growth you can you use that as a rough proxy for where it\u2019s all at. When the industry is growing at that pace downstream it is virtually impossible for the raw material world to keep up with. <\/p>\n \u201cWhat we\u2019re seeing here is a bit of an air pocket in the combination of China talking the price down and drawing down stocks as compared to there being an outright glut of new lithium raw material coming through. <\/p>\n \u201cSo my take on where the industry is at is, in fact, there will be a correction and there\u2019s a reasonable chance that will be pretty significant when it comes back, because of the after effects of that shock.<\/p>\n \u201cChina\u2019s overplayed its hand and we\u2019ll see, a reasonably significant price appreciation within a relatively short period of time on the proviso that the industry continues to grow at that pace. <\/p>\n \u201cSo what that translates to is if if it\u2019s 30% growth downstream, that\u2019s telling you that you need a minimum of new production in lithium raw materials of about 300-350,000 lithium carbonate equivalent tonnes (a year). <\/p>\n \u201cThat is three Pilgangooras in one year. So the reality is when that happens, the industry can\u2019t deliver it.\u201d<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post The Patriot we need?: Lithium legend Ken Brinsden is donning the cape again to prepare for the next upturn<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"So how long has this been in the works?<\/h2>\n
Having your success with Pilbara, you could well have sort of sat on the sidelines. What made you want to get back into the direct management side?<\/h2>\n
When you left Pilbara Minerals a couple of years ago the lithium industry was really on a high. It was looking at a shortage that we thought could almost last forever and it\u2019s really turned around now. Do you think that were close to a bottom in the lithium price that would support and moving back towards something that would support Corvette, or is there still a lot of water to run under the bridge?<\/h2>\n
Some companies here have gone into downstream processing, but others have said there needs to be more Government support. Do you think that will draw investment away from Australia to new hard rock lithium areas like Canada?<\/h2>\n
And you\u2019re confident that the collapse in prices that we\u2019ve seen now isn\u2019t going to put a roadblock in the way there? We\u2019ve already seen the announcement today on Sayona cutting staff and reviewing their operations.<\/h2>\n
Would that then mean more predictable price forecasting for someone looking to get in production in the future like Patriot to avoid problems like what we\u2019ve seen with the debt rug being pulled from under Liontown this week?<\/h2>\n
Is that something you genuinely view as being realistic that the world will be able to invest in and build that capacity outside of China that makes the industry more like a gold or a copper where it\u2019s not only the Chinese market that sets the price?<\/h2>\n
Just turning to Corvette itself, you had the resource announcement last year and considering the current pricing environment, is the focus now going to be about getting that drilling done and seeing how big you can make it?<\/h2>\n
In terms of the approvals and the permitting, you\u2019ve got kind of a different situation there to what you had when you were operating in Western Australia where you\u2019ve got the lake system and you\u2019ve got the Cree group that you\u2019re liaising with. Do you feel like those are going to pose the sort of challenges that you wouldn\u2019t have if you were operating in a jurisdiction like Australia or Brazil?<\/h2>\n
We have seen a pretty prolonged process though down the road at James Bay where Allkem or now Arcadium is.<\/h2>\n
In terms of the pricing now, at this lithium price, would you envisage being able to get a project like Corvette up and running?<\/h2>\n
From this vantage point where lithium just seems to keep spiralling down, can you see a correction coming?<\/h2>\n
Patriot Battery Metals (ASX:PMT) share price today<\/h2>\n\n
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