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OPERATIONAL REVIEW
DIGGeRs & DeALeRs PReVIeW MACA.NET.AU

Aussie lithium dismisses Goldman,

Credit Suisse outlook

f crashing global markets wasn’t enough, ing directly to customers, the banks’ as- lions of dollars in take-or-pay contracts. I
Ithe Australian lithium sector was left sumptions around market balance are can see their eyes across the virtual table.
reeling in June from a bearish outlook for wide of the mark. They don’t wave these reports at me. If I’m
demand from two of the world’s largest Global Lithium Resources Ltd manag- an EV executive sitting in a board room in
banks. ing director Ron Mitchell has become inti- Detroit or Munich or San Francisco and I’m
Goldman Sachs and Credit Suisse re- mately involved with lithium project devel- banking my EV strategy on getting reliable
leased lithium reports in June, both fore- opment and marketing after spending 10 supply, they will look to Australia, to ESG
casting an oversupply by the middle of the years with Talison Lithium and Tianqi. He and governing law.”
decade as new projects in Australia, South told Paydirt there was great uncertainty Liontown – which is developing the
America, Africa and China hit the market. around projects given the industry is still Kathleen Valley lithium project near Le-
“We expect lithium prices to continue to largely in its infancy. onora, Western Australia – saw its shares
correct for the rest of the year and remain “Defining the feasibility of projects – re- fall more than 15% following release of
under pressure from increasing supply source, grade, metallurgy – it all takes time reports, with producers Pilbara Minerals
over the next few years,” Goldman Sachs and if you are trying to fast-track that pro- and Allkem following suit.
said in its report. cess you will run into complications,” he Mitchell is not immediately concerned
Credit Suisse came to a similar conclu- said. with the short-term outlook for prices given
sion, downgrading their ratings on Allkem
Ltd and Pilbara Minerals Ltd from outper-
form to neutral.
“We previously considered the deficit
was intractable, but the world has changed
with inflation, war and lockdowns sour-
ing the demand outlook, whilst the pace
of supply response to spiking prices has
been more rapid than anticipated,” it said.
The banks received immediate back-
lash, not only from lithium miners but also
specialty consultancy Benchmark Mineral
Intelligence, which responded with a re-
port on June 9, entitled: “Lithium oversup-
ply? Not likely”.
It seems both banks are making optimis-
tic assumptions about the lithium devel-
opment pipeline, assuming every current
exploration and development project will
reach production on schedule. Bench-
mark, however, cast doubt on this assess-
ment, pointing to Tianqi Lithium’s Kwinana
hydroxide plant which produced its first Ron Mitchell
product in 2022, four years behind time. “The average plant takes 18-20 months
Adding to the normal project develop- to build, then there is commissioning. That
ment complications is the unique nature process depends on how much you’ve Global is still at the beginning of its lithium
of lithium markets where new producers done on the front-end and having the right journey, but he is adamant the company’s
must finetune product to meet customer partners who know what they are doing. It Marble Bar and Manna projects will be
specifications. can be 18 months before you have legiti- very highly sought-after once they hit de-
The space is also currently dominated mate commercial tonnes into the market velopment.
by junior companies. Analysts at Fitch and for brines projects that can be seven “There is very much a shift coming back
Solutions have identified 128 operations, years or more.” to the raw producers and Global has a
both active and prospective, controlled by “The Goldman Sachs and Credit Suisse strong board and management with great
103 individual companies, of which only notes are pinning a lot of hope on China expertise and two highly prospective as-
18 have more than two operations and 85 and African production. Those tonnes are sets in WA,” he said. “WA is a fantastic ju-
companies have just one. hard tonnes,” Liontown Resources Ltd risdiction to be mining any commodity but
“The lithium supply sector comprises a managing director Tony Ottaviano said at particularly lithium. It already accounts for
very large number of junior and explora- the recent Resource Rising Star confer- more than 50% of global production and
tion companies,” meaning higher project ence. “This is a bulk logistics business. given it is a jurisdiction which the EV value
execution risks, according to Fitch. Every day, my team and I are meeting chain respects and understands, I think
For Australian lithium companies speak- customers that are prepared to sign bil- that can grow.”

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