Australia’s Core Lithium (ASX: CXO) has halted production at its Finniss operations and flagged a significant write-down on the value of its assets as the effect of the battery metal’s weak prices becomes evident among producers.
The company, the only lithium miner in the Northern Territory, had announced a review of its operations in December, suspending early works on its proposed second mine BP33, due to “tough” market conditions.
Core said on Friday that, as result of the review, it would revert to processing stockpiled ore and suspend operations at its Grants open pit mine, part of the multi-mine Finniss hard-rock lithium complex.
The producer said it had about 280,000 tonnes of ore stockpiled, which would allow its processing plant to continue operating until mid-2024 without any further mining.
The Grants mine is Australia’s newest lithium operation and the only one outside of Western Australia. It opened in October 2022 and began producing and selling spodumene concentrate in February 2023.
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Lithium prices collapsed last year, defying even the most conservative forecast. According to analysts from Fastmarkets, spodumene concentrate is currently trading at US$950 per tonne, compared with about US$8,000 a tonne a year ago.
The government in Australia, where about half of the world’s lithium was mined in 2022, forecasts the spot price of spodumene will drop to US$2,200 per tonne in 2025 from an estimated average of US$3,840 per tonne last year, according to a quarterly report by the Department of Industry, Science and Resources issued last month.
Experts predict that lithium carbonate prices in top consumer and producer China could fall by more than 30% this year from December 2023 levels, as increasing supply from all major producers is set to outpace the rise in demand from battery users.
The price rout will likely take its toll on high-cost lithium producers first, before reaching the world’s top miners of the battery metals, analysts said.
UBS expects global lithium supply to jump by 40% in 2024, to more than 1.4 million tons of lithium carbonate equivalent.
Output in top producers Australia and Latin America will rise 22% and 29% respectively, UBS said. Production in Africa is expected to double, driven by projects in Zimbabwe, the bank said.
Chinese production will also jump 40% in the next two years, said UBS, driven by a major CATL project in southern Jiangxi province.
The bank warned that lower lithium prices will likely result in a potential halving in ASX lithium company profits in FY2025.
Please what is the current international price for lithium ore.