Pilbara Minerals Ltd.' Pilgangoora lithium-tantalum mine was officially opened Nov. 16, just four days after the company sanctioned its stage two expansion, positioning it well to push through Chinese spot prices' downward spiral which are showing no signs of bottoming.
Western Australian Mines and Petroleum Minister Bill Johnston opened the mine located 120 kilometers south of Port Hedland which has created 200 jobs after the construction workforce peaked at more than 800.
First product shipment occurred on Oct. 2 for stage one which comprises a 2 million tonne per annum mining and processing operation, and on Nov. 12 Pilbara Minerals sanctioned stage two to expand it to 5 million tonnes per annum, subject to regulatory approvals and the balance of project funding, with long-lead item orders and detailed engineering already underway.
Stage two commissioning is due from the December quarter of 2019.
There are seven lithium mines operating in Western Australia, but Macquarie Research Senior Resources Analyst Ben Crowley told S&P Global Market Intelligence that Pilbara Minerals is still the bank's preferred hard rock lithium miner with an outperform rating due to the project's size, "very scalable resource and a pretty compelling expansion option."
CRU Senior Consultant Alice Yu told S&P Global Market Intelligence when Western Australia's government gave environmental approval to Albemarle Corp.'s A$1 billion Kemerton lithium plant that she could not see a bottom in the falling Chinese lithium prices.
Yet Crowley said the long-term outlook for spodumene producers depends on how contract pricing evolves, and for Pilbara Minerals "you'd expect them to go reasonably well" considering the quality of its offtake partners in General Lithium Corp., POSCO, Ganfeng Lithium Co. Ltd. and Great Wall Motor Co. Ltd..
Canaccord Genuity Mining Analyst Reg Spencer told S&P Global Market Intelligence that Pilbara Minerals' spodumene prices are not fixed, but based on a formula which relates back to import-export prices of chemicals in China.
Crowley said that being the case, the important thing for Pilbara Minerals, like all mines, is to control the cost base, ensure they are in the bottom quartile then deal with the commodity price that prevails on the day.
However, he conceded there is no real lithium commodity price as such, given contract prices do not necessarily reflect the Chinese spot price by which the market often uses to gauge lithium stocks' outlook, which Spencer believes is a big part of the confusion and in some cases underperformance of battery metal stocks.
Spencer said the Chinese price having fallen so much this year is not so much due to supply coming from western world producers, but Chinese subsidies and the fact that some of that country's brine operations have finally started delivering into the market.
Mount Marion project partners Mineral Resources, Neometals Ltd. and Ganfeng Lithium said Reed Industrial Minerals Pty Ltd, the incorporated entity they hold which owns Mount Marion, has not been able to calculate its 6% spodumene concentrate prices as the publication of lithium carbonate and hydroxide pricing which it uses to do so has been suspended since April.
With that suspension now lifted, the partners said the 6% prices for the two quarters post July 1 have now been agreed.
"For shipments departing July 1 to Sept. 30, the 6% price is US$1,070.85 per dry tonne. For shipments departing Oct. 1 to Dec. 31, the 6% price is US$930.80 per dry tonne," the partners said.