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Australia’s Mineral Resources (ASX: MIN) has withdrawn its lithium production forecast for Mt Marion mine after ending a deal with Ganfeng Lithium.
The scrapping of the tolling agreement to convert spodumene concentrate from the operation into lithium battery chemicals is effective June 1, MinRes said.
The miner noted the deal cancellation also affects any payments under the agreement related to sales of lithium battery chemicals in the calendar year 2023.
The announcement comes amid a softening of battery chemicals prices in China not reflected in spodumene prices. It also marks a striking contrast from the first six months of this financial year, when MinRes reported record earnings from lithium hydroxide tonnes sold under the deal with Ganfeng.
“The company will continue to sell its share of spodumene concentrate to Ganfeng at prevailing market prices,” managing director Chris Ellison said in the statement.
MinRes had forecast an output of between 19,000 tonnes and 21,300 tonnes of lithium battery chemicals from Mt Marion in fiscal 2023.
While it did not provide fresh production guidance, the company said it expected spodumene concentrate shipments from Mt Marion to fall to 145,000-150,000 tonnes this year, below its prior forecast on the lower-end of a 160,000-180,000-tonne range.
MinRes noted construction of the mine’s processing plant was completed this month and commissioning has started. A shipment of spodumene that had been expected to leave this month, however, is now scheduled to be delivered in July.
MinRes also forecast lower production of spodumene concentrate from its Wodgina joint venture with lithium major Albemarle (NYSE: ALB).
Spodumene concentrate volume for fiscal 2023 at the Western Australia mine is expected to be at the lower end of the guidance of between 150,000 to 170,000 dry metric tonnes.
Located 40km south-west of Kalgoorlie, the Mt Marion lithium mine holds the world’s second-biggest high-grade lithium concentrate (spodumene) reserves.
The mine development was approved in October 2010 and construction began in 2015. Production of lithium concentrate from Mt Marion started in February 2017.
Strong demand for lithium from the electric vehicles sector, paired with limited supply of the battery metal pushed prices to record levels in November last year, soaring more than ten-fold from early 2021.
A drop in demand for electric vehicles in China, the world’s top market, left a stockpile of the metal and drove prices down.
Lithium prices fell by at least a third in the first quarter, according to an index tracked by Benchmark Mineral Intelligence, but are expected to recover before year-end as a global market deficit is expected to reappear.
