Core Lithium announces temporary halt to mining activities at its Finniss project amid a low margin market as low spodumene prices force a margin squeeze. 

Core Lithium has announced the temporary halting of mining activities at its Finniss Lithium operation. The mine, based in Northern Territory, Australia, will continue to process stockpiled ore from the Grants open pit on site, with Core Lithium stating it has enough stockpiled material to continue producing spodumene concentrate until mid-2024. This has come as a result of reduced lithium prices as Core Lithium attempts to reduce costs and maximise margins amidst a low-price environment. The lithium sector has seen prices for spodumene concentrate drop a dramatic 77% over the past 12 months from January to December 2023. Industry inventories of concentrate remain high as supply from producers has outstripped the capacity of downstream refineries to process this feedstock into refined lithium chemicals. The result has been a margin squeeze on higher-cost mineral producers such as Core Lithium.

In the case of Core Lithium, and other producers currently experiencing a margin squeeze, success will depend on their ability to cut costs and maintain positive cash flow, and the debt/equity ratios of their operations. Junior miners will be hit particularly hard as these operations have frequently financed the capital development cost of their projects via debt funding.

Given the recent acquisition moves made by the likes of Hancock Prospecting and SQM over Azure Minerals, a low-margin market can often mean an opportunity for players looking to enter the lithium sector and take positions in companies. These can range from major miners looking to enter the lithium sector, downstream producers looking to secure supply over lithium feedstocks, or competitors looking to consolidate their hold on the upstream sector. The same dynamic played out in mid-2021 as low lithium prices led to a number of casualties in the lithium space, with Pilbara Minerals then acquiring fellow Western Australia-based producer Altura Lithium. Given recent mergers and acquisitions activity in the lithium space and with lithium prices likely to remain depressed over 2024, the market is opportune for further M&A activity and Project Blue expects more announcements in 2024.