Another Lithium Mine Bites The Dust. Time To Buy?
Only a fearless investor has gone anywhere near the lithium industry this year, but the latest round of mine closures could be a sign that the bottom is close with a bounce to come in the new year.
Besieged Australian lithium producer Mineral Resources is the latest to pull the plug on a loss-making project, announcing earlier today the closure of its Bald Hill mine in Western Australia with the loss of up to 300 jobs.
Another Mineral Resources lithium mine run in joint venture with Albemarle Corporation, the leading U.S. producer of the metal, is on notice that it might also close or be severely scaled back.
A third example in the past week of the crisis gripping the lithium industry is a decision of Liontown Resorces to slow the development of its new Kathleen Valley mine, also in Western Australia, with the aim to achieve A$100 million in cost savings.
Liontown was last year's lithium star and target of a share market raid by Australia's richest person, iron ore billionaire Gina Rinehart who bought an 18% stake in the stock at close to the peak price of A$3 a share.
Since Rinehart made that investment the Liontown share price has collapsed in line with the lithium price, to last trade at A85 cents, down 72% and broadly in line with a 75% fall in the price of lithium carbonate which has dropped to US$12,000 per kilogram.
Albemarle chief executive Kent Masters said last week when announcing a $1 billion third quarter loss that he expected lithium to stay in a range of $12 to $15/kg for the foreseeable future.
"We're positioning the company to compete at that level," he said.
Albemarle's 2025 capital expenditure budget has been halved to a range of $800-to-$900 million and employee numbers trimmed by 6%.
Investors reacted positively to the cost cutting campaign which was announced the day after Donald Trump regained the U.S. Presidency, lifting Albemarle's share price by 18% to $111 early this week. The stock has since retreated to $102.80 to still be up 9% since the cuts were announced.
The lithium crash is the result of overproduction and slower than expected demand thanks to sluggish growth in the sale of electric vehicles (EVs) which are the biggest market for the metal which is a key ingredient in their renewable batteries.
A possible turning point in the lithium sector can be seen in last month's $6.7 billion all-cash bid by Rio Tinto for Arcadium Lithium, a joint U.S. and Australian miner.
That deal, which is slowly making its way through a legal process, was the first substantial step into the lithium business by a globally significant mining company and a move which sets Rio Tinto apart from rivals such as BHP and Anglo American.
Smaller lithium stocks have been showing signs of a recent revival as earlybird speculators buy into what could be a recovery story based on a belief that EVs will eventually shake off their negative reputation.
Pilbara Minerals, an Australian favorite which had been falling steeply from the start of the year started to rise again in early September to now be trading at A$3.08, up 30% on its 12-month low of A$2.36 reached in early September.
