The slide in lithium prices has forced many miners to cut production, including international company Galaxy Resources. But it’s confident its cautious strategy now will hold it in good stead when the market picks up again.
DESPITE the recent slump in the world lithium market, Galaxy Resources remains optimistic and excited about the future, with the company committed to unlocking and creating superior returns for shareholders from its existing assets.
The international ASX-listed company holds lithium production facilities, hard rock mines and brine assets in Australia, Canada and Argentina, wholly owning and operating the James Bay lithium pegmatite project in Quebec, Canada, and Mt Cattlin in Ravensthorpe, WA, which produces spodumene and tantalum concentrate.
The miner recently announced that work at the WA site would be cut by 40pc next year, joining the list of battery minerals producers scaling back their mine output.
The strategy prioritises value over volume, and is designed to stem the company’s cash burn amid the collapsing lithium prices, which have seen Galaxy’s net cash position (including debt) drop by almost half from $US285m just half a year ago.
Prices for all battery minerals are currently being hurt by changes to Chinese electric vehicle subsidies and a global slowdown in new car sales, which have coincided with dramatically increasing global supply of lithium and graphite.
However Galaxy chairman Martin Rowley said, overall, he was bullish about the long-term global demand for lithium, especially as China switches more towards electric vehicles.
“The lithium business remains strong with a very exciting future,” he said.
“The trend in vehicle electrification, together with the exponential growth in battery storage, is expected to drive significant growth in the demand for lithium products for at least the next decade.
“Roskill Consulting Group is forecasting that EV sales worldwide will grow at a 32pc compound annual growth rate through 2027, reaching 19.6m vehicles in annual sales volumes.
“Bloomberg New Energy Finance predicts EV sales to reach 60.2m units in 2040, representing a penetration rate of 55pc of all new vehicles sold annually.
“Demand from EV batteries is expected to represent 64pc of the total consumption of lithium compounds by 2027.”
Mr Rowley said structural changes in the electrification of transportation, along with continued policy and regulatory support, was accelerating investment all the way along the lithium value chain.
He said Galaxy had established strong relationships with reliable customers for its Mt Cattlin production.
“These customers have confirmed that Mt Cattlin material meets their evolving performance and quality requirements and … we remain very confident in the lithium business model,” he said.
In fact, during the first half of this year, Mt Cattlin enjoyed one of the strongest periods of operational execution since the plant was restarted in 2017, after being put into care and maintenance in 2013.
Key operational achievements in the period included a record quarter of production results for Q2, with total lithium concentrate production up by 51pc compared with the previous half-year, with an average final product grade of 5.9pc Li2O.
The cash cost per tonne of US$387/dmt produced, positioning Mt Cattlin as one of the lowest cost producers of spodumene.
The operational turnaround – the result of a strong focus on mining and processing optimisation and cost rationalisation – included improved mine planning and scheduling to better match process plant throughput, improved mining fleet utilisation, and in-pit ore sorting to reduce the amount of contaminated ore reporting to the plant.
For the moment, with the depressed conditions, Galaxy plans to reduce production at Mt Cattlin, in addition to lowering costs, to maintain positive cash margins and preserving resource life.
Galaxy anticipates the lowered production combined with existing inventory will be able to meet contract commitments and additional demand throughout the year.
“Production can be ramped up swiftly and efficiently should market conditions materially improve,” Galaxy said in a statement.
The company expects to process its stockpiles to produce lithium-rich spodumene concentrate about 75pc of existing rates.
”This reduced scale of operation, combined with the cost initiatives currently under way, will allow Galaxy to maintain a low unit operating cost and a forecasted positive operating cash margin,” Galaxy said.
”As there will be no change in staff levels and contractors, production will be able to be ramped back up to full rates promptly when market conditions improve or as required by Galaxy’s customers.”
The plan to cut production comes after Pilbara Minerals significantly reduced operations at its Pilgangoora lithium mine in WA, Glencore slashed production of cobalt in Africa, and graphite producer Syrah Resources cut production by 66pc.
Chinese giant Tianqi, which is half-owner of Australia’s biggest lithium mine at Greenbushes in WA, also reported losses in the latter part of 2019.
Mt Cattlin
The Mt Cattlin spodumene project is located at Ravensthorpe, where Galaxy mines pegmatite ore and processes on-site to produce a spodumene concentrate and a tantalum by-product.
At full capacity, ore can be processed at a rate of 1.6mtpa with lithium oxide concentrate production of 180,000tpa.
Galaxy Resources holds a series of tenements surrounding and including the mining lease M74/244, which contains the majority of the spodumene (LiAlSi2O6) resource identified to date and which hosts the Mt Cattlin mine.
The operations include open-pit mining of a flat-lying pegmatite ore body, allowing mining to proceed at a constant strip ratio once the ore is uncovered.
Mining is carried out using excavator and truck operations, delivering to a conventional crushing and HMS gravity recovery circuit.
Contract mining is used for grade control drilling and earthmoving operations (drilling, blasting, load, haul and ancillary work) for the open-cut mining operation. The pit design, encompassing existing measured and indicated resources, has been defined as the Dowling pit.
Galaxy has 14 giant solar trackers and two wind turbines in operation at Mt Cattlin, which together generate 226 MWh per year of renewable energy.
Mt Cattlin was the first mine site in Australia to use real-time solar tracking panels as part of its power generating requirements, which enable the solar panels to follow the sun in all directions to maximise the power generated, providing 15pc more power than a single axis system.
The wind and solar hybrid system supplements power from Galaxy’s 5MW diesel generator. This system also promotes savings in carbon emissions.
Sal de Vida
Galaxy is advancing plans to develop the Sal de Vida (Salt of Life) lithium and potash brine project in Argentina situated in the lithium triangle (where Chile, Argentina and Bolivia meet), which is currently the source of 60pc of global lithium production.
It has excellent potential as a low-cost brine-based lithium carbonate production facility.
Galaxy has revealed plans to make a final investment decision to develop the project by mid-2020, with first production anticipated in 2022.
The company expects to fund the first stage from its balance sheet once the final investment decision has been made and after a partial sell-down in the project.
All up, Galaxy plans to develop the project in two to three stages, which, according to the company, allows capital expenditure to be broken up into phases in addition to reducing development risk and simpler management of construction.
Feasibility studies support the development of Sal de Vida, which when completed, will include evaporation ponds, a battery grade lithium carbonate plant and a potash plant.
The rationale behind the strategy is to take advantage of the asset’s potential as a low-cost brine-based lithium carbonate operation.
This has been underpinned by a simplified flowsheet along with reduced energy and water requirements to enhance sustainability.
Galaxy is targeting a 40-year operation at Sal de Vida with 1.1mt of lithium carbonate equivalent firmed up in reserves and 4.9mt lithium carbonate equivalent estimated in resources with potential for this to be grown.
Ongoing field activities include continued exploration drilling, with the target objective of enhancing the company’s understanding of the hydrogeological nature of the basin and hydraulic behaviour of the brine at depth.
James Bay
The James Bay Project lies in the northeast part of the Superior Province, within the Archean Lower Eastmain greenstone belt composed predominantly of amphibolite grade mafic to felsic metavolcanic and metasedimentary rock and minor gabbro.
The deposit comprises of several swarms of pegmatite dykes. Surface mapping identified 15 different pegmatite swarms, each consisting of up to seven dykes.
Feasibility studies are ongoing and the James Bay Project Notice has been submitted to both the Federal Government of Canada and the Quebec Government.
The company’s plan for James Bay is to provide expansion capacity to meet future lithium demand as it arises.
