Mt Cattlin, one of the spodumene concentrate producing assets owned by Arcadium Lithium in Western Australia, has been reported to face closure since late February.
Arcadium's latest quarterly report states that Mt Cattlin will be subject to "a reduction in planned spodumene production" because the company has cost optimization plans considering the lower lithium price. Several questions were raised in the quarterly call to follow up on Mt Cattlin, representing the market's interests in this asset.
Three questions will be answered in this article for readers contemplating the future of Mt Cattlin.
- How has Mt Cattlin performed so far?
Mt Cattlin achieved strong growth of spodumene concentrate production in 2023. In Q1 2023, the asset has produced 38,915 dmt of 5.3% grade concentrate, doubling the amount from the December 2022 quarter. Following that, 58,059 dmt, 72,549 dmt, and 69,789 dmt of concentrate were produced in the subsequent quarters in 2023.
However, the realized price in the December 2023 quarter dropped to US$763/dmt cif, down 71% quarter-on-quarter due to various reasons including market performance, a shift of pricing mechanisms and shipment timings, according to Arcadium. This 71% drop is considered way above the industry average, as SMM Australian Spodumene Concentrate Import Price in China shows a 37% drop in the same period of time.
- Will Mt Cattlin generate more value for Arcadium in the near term?
Even though Mt Cattlin is producing at "a pretty low marginal cost of production now", the situation is not sustainable. The Arcadium CEO Paul Graves acknowledges that Mt Cattlin has very limited life of mine if the operation does not switch to underground.
According to the disclosure of Allkem before it merged with Livent to form Arcadium, in June 2023, Allkem provided ore reserve update, and laid out visions for underground mining, expecting an underground mining Feasibility Study delivered in CY24 to find an optimised mining method that may extend mine life to August 2027.
For this to happen, there must be sufficient capital supporting the transition. But it has been rejected by the Arcadium CEO as an option to consider because as many CEOs of Australian lithium companies have previously said, this is not a good time to invest.
- Then what is Arcadium's strategy regarding Mt Cattlin in the future?
The CEO has made clear that Mt Cattlin is not "a particularly high focus" for Arcadium Lithium at this moment. Arcadium expects an increase in lithium hydroxide and lithium carbonate sales but lower spodumene concentrate sales in 2024. Therefore, around 80% of the expected capital spending will be put in the Argentine and Canadian downstream facilities. The company also shows little confidence in selling the asset as an exit option, because when facing a gloomy market with limited room to profit and few buyers, Mt Cattlin has little edge to leverage for a longer breath.
Author: Hongqiu Su | Battery Metals Analyst Associate | London Office, Shanghai Metals Market
Email: lilysu@smm.cn
