According to a report by Mining.com, lithium supplier MG Critical Materials lowered its core profit guidance for 2024 on Wednesday, citing "unprecedented" low prices of lithium and vanadium with greater impact on the company's profits. The group now expects its full year adjusted EBITDA to be about $130 million, down from the previous forecast of $200 million.
The group anticipates a $60 million and $10 million reduction in profits from lithium and vanadium, respectively. It is reported that AMG has been betting on lithium production and is developing its supply chain for the critical metal used in electric vehicle batteries. However, global oversupply has put pressure on lithium prices. To cut costs, the company plans to reduce approximately 200 full-time employees, which equates to about 5.6% of its total workforce. Nonetheless, AMG also stated that the number of layoffs will be offset by the addition of new employees at its plants in Germany and Brazil. The group is accelerating the expansion of its two major lithium projects as well as growth in its LIVA battery and engineering business. Therefore, AMG expects its workforce in 2024 to remain on par with 2023. Public information shows that AMG owns and operates a spodumene concentrate plant in Brazil, with its Mibra mine in Brazil producing spodumene since 2018 with a capacity of 90,000 tons. In 2022, the company planned to expand its spodumene production to 130,000 tons and build an industrial-grade lithium salt processing plant locally. The significant drop in lithium prices is indeed a heavy burden for various overseas lithium mining companies.
At the beginning of January, Australian lithium miner Core Lithium suddenly announced that it decided to suspend mining operations at its Finniss lithium project in response to the continuing downward trend of lithium prices; and thereafter, Australian lithium mining company IGO also announced a change in pricing model for long-term contracts, moving from the average lithium salt price of the previous quarter (Q-1) calculation method to using the average lithium salt price of the month prior to shipment (M-1) for settlements. All of these are unavoidably affected by the fall in lithium prices. As shown by the spot price of spodumene concentrate (CIF China), as of February 22, 2024, the spot price of spodumene concentrate (CIF China) is $910 per ton, down from the high point of $5510 per ton in 2022 by $4600, marking a decline of 83.48%.
Moreover, AMG plans to invest about $125 million in 2024, mainly for expenses related to its German and Brazilian plants, while also reviewing the development of resources and other expansion activities in these projects. AMG’s CEO Heinz Schimmelbusch said during a conference call that the company's principle is to maintain low-cost production at its lithium mining projects in Brazil. Therefore, the company's demands are more stringent than before, with each resource project being re-evaluated to see if they meet the new standards. Benefitting from a one-time dividend of $10 million from minority stakes investments, an additional gain of $6 million from the US Inflation Reduction Act (IRA) tax law, as well as differences in the shipment schedule of the lithium concentrate, the company's EBITDA for 2023 is $350.5 million, higher than the previous guidance of $320 million. In addition, regarding vanadium, AMG stated that, according to the US IRA law, its vanadium division will continue to receive a subsidy of at least $6 million per year.
