Frank
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Good luck to all for the mother of all announcements to come..
*Fyi, fwiw, as
MinRes boss wants to know what Goldman Sachs was smoking when it called the end of the lithium boom
- MinRes boss Chris Ellison asks what Goldman Sachs bankers were smoking when they predicted a crash in lithium prices
- The mining rich lister thinks supply deficits will continue until the end of the decade
Lithium prices have stunned in 2022, with chemicals for electric vehicle batteries fetching more than US$70,000/t for several months, around 10 times prices seen in the last downturn a couple years ago.
The concentrate feedstock known as spodumene, trading for under US$500/t in early 2020, is now worth more than US$6500/t on the spot market.
“I don’t understand with a lot of analysts, if you get a little thing called Google you can get on there and it’ll tell you how many cars they’re going to make this year, next year and the year after,” Ellison said on MinRes’ 2022 results call.
“It’ll tell you where the producers are with rock and brine (and) it’s not a hard equation, but we’re in supply deficit at the moment and it feels like it’s going to stay there through til at least 2030.”
“I read that article a few weeks ago from Goldman Sachs and you’ve just got to wonder what they were smoking.
“If you don’t own your rock you’re screwed … by us.”
Ellison says at the long term consensus price for hydroxide of US$16,500/t, many converters who don’t own their own supply of spodumene or brine would be out of business given the prices they have to pay for limited supplies hard rock feedstock.
“That means there’s a huge supply problem; I like it, again we’re in the right place at the right time,” he said.
“…California came out of the blue and said by 2035 no more internal combustion engines on the road,” he said.
“You go, ‘yep that’s sensible’ but none of that is factored into the numbers people are at in terms of where the supply is coming from.”
MinRes is currently restarting the Wodgina JV, while its 50-50 JV with Ganfeng at the Mt Marion mine near Kalgoorlie will see production double to 900,000tpa of mixed grade spodumene production.
The company delivered a $1 per share dividend after turning a $400m FY22 profit, reversing a $36m loss from the first half of the year, as soaring lithium prices stemmed lower earnings from sliding iron ore revenue.
Give me spot
On top of its decision to develop the $3 billion Onslow iron ore hub in the Pilbara, the other big news from MinRes’ financial results was a restructure of its lithium JV with Albemarle.The deal will see MinRes’ share of the new Kemerton lithium hydroxide plant drop from 40% to 15%, while its share of the Wodgina mine in the Pilbara will lift from 40% to 50%, with MinRes taking operational control of the mine and power over the pricing index for its product.
Those marketing metrics have previously been determined by Albemarle, which has a history of conservatism when it comes to its approach to pricing.
While spot-exposed producers like Pilbara Minerals have seen spodumene sale prices soar in recent months, larger miners wedded to hedges and long-term contract pricing have seen their sale prices lag the rabid spot market.
“I want control back of my pricing,” Ellison told analysts and investors.
“So they’re still going to sell our product but they sell it under our model … we just take the price on the day.
“Albemarle asked me what I’m going to do one day when it all turns around and there’s more supply than demand, and I said I’ll do what I always do, I’ll change.
“But in the meantime while supply is short we’re going to take advantage of the price on the way up and I am fairly convinced that I’ve got five to seven years of that.”
MinRes wants to boast upwards of 110,000t of lithium hydroxide production in five years, with a deal that future conversion facilities will be shared between the Wodgina JV owners.
Ellison says MinRes could look overseas for both conversion opportunities and new mining operations, but that the company may be able to deliver a downstream conversion plant at the Wodgina mine in the Pilbara (a study is 80% done) cheaper than anywhere else thanks to a cheap power source via its in-house gas resource.
With mining services, lithium, iron ore, gas and all that in its portfolio MinRes is a bit of a polymath in mining terms.
Ellison is looking to add battery manufacturing to that list as well, saying MinRes has dreams of opening a battery manufacturing hub in partnership with a major, deep-pocketed producer in WA.
Good luck from all of us on your Eye Surgery Bro
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Frank
