Want to add that my post is trying to decode the share price decline in the last week.

Here is another from the AFR

https://www.afr.com/companies/mining/the-eight-mines-most-at-risk-of-closure-amid-a-battery-metals-slump-20240109-p5evzc

It mentions the Wyloo operations which is also underground

Thanks for sharing, Wyloo being Nickel are probably at higher risk. Need to deep dive the cost to mine?

Wyloo can withstand low nickel prices for years, because it's owned by multi-billionaire Andrew ("Twiggy") Forrest, who has that massive income stream from FMG coming in every 6 months as well as all of his other investments through Tattarang. Wyloo are taking a long term view of nickel and I wouldn't be surprised to see further M&A in the space by cashed-up companies like Wyloo who can afford to look through the cycle and invest at the lows.

Very good point !

There are 12 mines there on that map (reproduced above) in that AFR article that @edgescape mentioned here yesterday - (Australian mines in danger of closure in 2024 (afr.com) [09-Jan-2024, 7:31pm]) - but they talk about only 8 of them. They do not discuss - Golden Grove, Kathleen Valley, and the two up in NT, Grants and BP33, in any detail, except that Grants was mentioned in the opening paragraph:

"...Core Lithium said it would close its Grants mine near Darwin, cutting 150 jobs. Two days later, it was the loss-making Savannah nickel mine, with 140 jobs gone. And the battery minerals sector could be on track for more mine closures as its quarterly reporting season gets under way – with several producers on track to report annual losses exceeding $100 million."

Core Lithium (CXO) also announced in December that they were suspending works on their BP33 project in the Northern Territory.

Golden Grove is a copper, zinc and gold mine owned by 29Metals (29M) that also produces some silver and lead, so 3 base metals and 2 precious metals. They say they have a large metal endowment at Golden Grove of 1.03Mt copper, 2.47Mt zinc, 1.28Moz gold, 56Moz silver, and 153kt lead contained in their Mineral Resources estimates (Mt = million tonnes, Moz = million ounces, kt = thousand tonnes).

Source: 29Metals Macquarie Western Australia Forum 2023 Presentation [30 Nov 2023]

Golden Grove and 29Metals are not specifically discussed in the AFR article (linked to above under the map), but they have put Golden Grove on their map (see above) and 29M could struggle with Golden Grove if copper and zinc prices stay lower for longer.

Kathleen Valley is the much-hyped Lithium (Li₂O) and Tantalum (Ta₂O₅) project being developed by Liontown Resources (LTR) who received a bid from Albemarle in early September last year to buy all of Liontown at $3.00/share, which the Liontown Board agreed to and recommended to their shareholders, but that bid was then withdrawn in mid-October because of the large blocking stake (of 19.9%) that had been accumulated by Gina Rinehart and her eldest daughter Bianca (pictured below), held either in their own names or by their private (family) mining and investment company Hancock Prospecting, much of it bought at relatively high prices, i.e. the majority bought for $3/share, and the bulk of the remainder bought at prices between $2.95 and $2.99 according to the "Change of..." notices that they lodged during that period. $3 was the price that the Liontown Board was prepared to accept from US-based Albemarle, but Albemarle's bid was an off-market bid that required a LTR shareholder vote, and Gina's Hancock Prospecting was buying at the same price on-market.

Earlier last year, Liontown had knocked back offers from Albemarle from March 2023 onwards priced at $2.20, then $2.35 and then $2.50 a share. It wasn't until Albemarle upped their offer to $3 that the LTR Board got interested, and then Gina muddied the water with her 19.9% which she said would vote against the Albemarle takeover. At $3/share Liontown would have cost Albemarle A$6.6 Billion.

The Rineharts own and control Hancock Prospecting, whose general operations consist of iron ore exploration and mining, marketing and sale of iron ore, and the breeding and selling of beef cattle in Australia, as well as investments in energy, property and equity (including lithium companies).

Major projects undertaken by the company in the mining sector include:

• Roy Hill - A large iron ore deposit located in the Pilbara region, Western Australia.
• Atlas Iron - an Australian company, mining and exporting direct-shipped iron ore from its Mt Webber & Sanjiv Ridge mines.
• Hope Downs JV - A joint venture with Rio Tinto located north-west of Newman, Western Australia.
• Sirius Minerals - a deposit of poluhalite used in plant fertilizers, located in North Yorkshire, United Kingdom.

Other exploration projects:

• Pilbara Iron Ore Exploration - Iron ore deposits located in large areas of highly prospective geological formations.
• Four Eagles Gold - A joint venture with a subsidiary of Hancock Prospecting, Gold Exploration Victoria and Catalyst Metals.
• Minerals Australia - A wholly owned subsidiary of Hancock Prospecting. Its focus is on active exploration for copper and gold in NSW as well as oil and gas exploration in Beetaloo Basin, Northern Territory.
• Queensland Coal Investments - A wholly owned subsidiary of Hancock Prospecting. Its focus is on coal exploration in Queensland.
• Sellheim Project - A joint venture with a subsidiary of Hancock and local explorers. This is an exploration project targeting gold and copper mineral targets located in North Queensland

Hancock Prospecting also has a subsidiary called S. Kidman & Co. which owns 25 properties that are used for the breeding and selling of beef cattle within Australia, having operations in Western Australia, Northern Territory, South Australia, Queensland, and New South Wales.

Source: https://www.ibisworld.com/au/company/hancock-prospecting-pty-limited/12377/

S. Kidman & Co also recently brought Rossi Boots, having previously acquired popular outer-wear brand Driza-Bone from the same company (Melbourne-based outfit Propel Group). It seems like another FOMO moment from Gina, Australia's richest person, because the Rossi Boots purchase puts her in direct competition with Andrew ("Twiggy") Forrest’s RM Williams business. [Source: https://www.ginarinehart.com.au/mining-mogul-gina-rinehart-advances-her-footing-in-the-fashion-industry/]

Hancock Prospecting also have interests across various ASX-listed lithium companies, like Liontown (LTR, discussed above) and Azure Minerals (AZS). While Liontown's future remains unclear at this point, it is possible, but far from certain, that Gina might do a deal with Albemarle like she recently did with SQM to jointly acquire Azure Minerals (AZS) so they can develop the Andover lithium project with co-owner Mark Creasy.

SQM had acquired 20% of Azure in March 2023 but the real battle for Andover kicked off on October 26th when the Azure Board endorsed a $3.52/share offer from SQM. The SQM bid came hot on the heels of Gina's Hancock Prospecting forking out $1.3 billion for 19.9% of Liontown Resources and foiling New York-listed Albemarle’s $6.6 billion deal. SQM thought it had Rinehart-proofed its bid for Azure by building a plan B into the deal structure which would see the Chilean company pivot to buying Azure shares on-market at $3.50 – now $3.65 – if the initial approach failed. However within 24 hours, Hancock Prospecting – being careful not to trigger the 19% threshold that would have allowed SQM to buy on-market – emerged with an 18.4% stake and killed any hopes of a straightforward transaction.

Last month, one week before Christmas, Gina Rinehart landed her first big partnership in lithium by joining forces with Chilean giant Sociedad Química y Minera (SQM) to launch a knockout $1.7 billion bid for lithium explorer Azure Minerals. Gina’s Hancock Prospecting and SQM have locked up more than 60 per cent of the stock after their improved 50-50 bid, pitched at $3.70 a share, up from $3.52, won the support of at least two other major shareholders: billionaire prospector Mark Creasy and Delphi Group.

Chris Ellison’s Mineral Resources can opt to sell into the Rinehart-SQM takeover, or resist giving up what is currently a 13.5% stake. Mr Ellison said in November that he wanted a big piece of Azure’s Andover project. Since the Rinehart-SQM takeover in December emerged MinRes has so far declined to reveal its intentions.

Mrs Rinehart has made it clear Hancock is seeking partnerships in lithium that could bring project development and mining expertise to the table as well as capital. The partnership with SQM, which is already developing a lithium mine and hydroxide plant in WA through a joint venture with Wesfarmers, represents a big step in delivering on that strategy.

Source: AZS ASX: Gina Rinehart joins forces with lithium giant SQM in $1.7b Azure bid (afr.com)

Liontown (LTR) shareholders can only hope for a similar outcome with LTR now (between Rinehart's Hancock Prospecting and Albemarle).

But back to the AFR article about "eight mines most at risk of closure amid a battery metals slump"...

It's not all bad; here's what they had to say about MinRes' and Ganfeng's (50-50) Mt Marion lithium mine:

Mt Marion lithium

Owner: Mineral Resources, Ganfeng

Things are getting tight at Mt Marion now spodumene prices are testing $US1000 a tonne, but there is reason to believe lithium prices would need to slump further to seriously threaten the mine’s future. Citi analysts named $US1000 as the approximate break-even point for Mt Marion in a note published shortly before Christmas. Mt Marion’s owners were more optimistic in August, saying the mine’s unit costs in the year to June 30, 2024 would be $US771 to $US838 a tonne.

More importantly, Mt Marion’s unit costs are likely to get better in coming years; the mine is going through temporary growing pains that involve the removal of abnormally large amounts of waste rock until mid-2024. Once that work is done, unit costs should fall. Mineral Resources can also cut supply from other mines such as Bald Hill if it wants to support prices, meaning Mt Marion is probably safe, if not completely out of the woods.

------ end of excerpt -------

I maintain that you need to look at the owners of these projects - those owned by billionaires like Twiggy Forrest (Wyloo's mines) and large diversified corporates like MinRes - with Chinese partners (Ganfeng for MIN/Tianqi for IGO) and/or giant US partners (Albemarle), can afford to take a longer view and ride out lower prices. Also, companies and individuals (like Gina Rinehart) who are investing alongside Chilean giant SQM (Sociedad Química y Minera de Chile) - which is currently worth around US$13.7 Billion - can, again, take a longer view, as these overseas battery metals giants clearly are.

Lower prices will place some smaller companies in distress, and that can present opportunities for some of the other players in the space, like Wyloo (Andrew Forrest), MinRes (Chris Ellison), Hancock Prospecting (Gina & Bianca Rinehart) and cashed-up Pilbara Minerals (PLS) - who may decide to pick up those distressed assets at low prices, as Chris Ellison's MinRes did recently with Bald Hill.

Keep in mind that Pilbara Minerals (PLS), owner of Pilgangoora, which is not on the map above despite having costs that are higher than Greenbushes, has a massive net cash buffer. It was around $3 Billion cash at the end of September and we'll be told next week (on Wednesday 24th Jan) what it was at the end of December after they paid that tax bill that was almost a billion I think (from memory). Gaurav Sodhi from Intelligent Investor believes that PLS will report at least $2.5m net cash - see here: Pilbara Minerals: making it big - Intelligent Investor.

By the way, here's what the aforementioned AFR article said about the Albemarle/IGO/Tianqi-owned Greenbushes Lithium Mine:

Greenbushes lithium

Owners: Albemarle, Tianqi and IGO

The Greenbushes mine is owned jointly by IGO, China’s Tianqi and Albemarle. [Image credit: Getty]

Greenbushes shouldn’t be on this list.

As the world’s biggest and highest-grade, hard-rock lithium mine, Greenbushes should be able to withstand any storm for longer than its rivals. But the commercial strategy adopted by the mine’s vertically integrated owners has created the bizarre prospect that it may curtail production while less competitive mines continue to export at full speed.

Weak demand for lithium and electric vehicles prompted Tianqi to take less than its full share of Greenbushes’ spodumene late last year. As a result, stockpiling has been under way for months now, and IGO warned in October that mine production may be cut if demand doesn’t improve. The alternative would be to keep mining and sell the excess product on daily spot markets to third parties; a tactic that would likely put further pressure on lithium prices.

Amid these short-term challenges, the owners of Greenbushes will want to give investors some long-term optimism. Don’t be surprised if we soon see a big resource upgrade that reveals the mine’s orebody to be bigger and better than previously understood.

--- end of excerpt ---

Source: Australian mines in danger of closure in 2024 (afr.com)

Further Reading:

No way lithium will wipe out: Albemarle’s Australian operations boss | The Chronicle

Rinehart, Packer, Gances among 12 billionaires to watch in 2024 (ginarinehart.com.au)

Massive cross trade this morning

However, I have my eyes on MIN instead which has also fallen by a large amount today.

10-Feb-2024: Just to update this post (which I added here 3 weeks ago) - we were speculating about how much cash Pilbara Minerals (PLS) would have as at December 31 when they released their Quarterly Activities Report for the December Qtr. The answer was: $2,144 billion. See here: PLS-December-2023-Quarterly-Activities-Report.PDF and here: PLS-December-2023-Quarterly-Activities-Presentation.PDF. They also released this offtake update last week: PLS-Extended-Offtake-Agreement-with-Chengxin-Lithium-07Feb2024.PDF,

I was thinking around $2 billion. Gaurav Sodhi (from Intelligent Investor) thought it would be at least $2.5 billion - but, to be fair, lithium prices fell a lot after he made that prediction. Still, $2.1 Billion is a nice buffer to have when the commodity you produce is in a huge slump. Shortman.com.au still list PLS as being the most shorted company on the ASX with 20.59% of their SOI sold short. I still don't hold PLS, but I also think there are more obvious shorts in the sector than them. They are very well placed to ride this out, and also to pick up distressed assets at firesale prices if they choose to. That is apparently one of the short theses regarding PLS - that they will use their cash to buy inferior assets to what they already own, but I would be backing their management to keep making wise capital allocation decisions as they have to date.