Battery sector | The price of lithium weighs down the mining industry

Electric vehicles are fueling demand for lithium, but its extraction is no guarantee of profit when prices are plummeting. The Quebec sector has just received its first warning with the restructuring which is beginning at Sayona.

Less than six months after shipping a first shipment of spodumene concentrate from its complex in La Corne, in Abitibi-Témiscamingue, the lithium producer is already tightening its belt to “ensure the financial viability” of its project . Everything will be studied to slash expenses and 15 executives, including CEO Guy Belleau – a veteran of the mining industry in Quebec – have been fired.

Sayona is not the only one to suffer the brakes. In Australia – the world’s leading producer of lithium – several mining companies have successively announced cutbacks, the shelving of expansion plans and refinancing strategies to get through the current downward cycle. In Quebec, extraction is part of the battery ecosystem that the Legault government is trying to put in place.

“The current context is hitting companies in the production phase quite hard,” underlines Michel Jébrak, professor in the department of Earth and atmospheric sciences at UQAM. Sayona is no exception. »

In one year, spodumene prices collapsed. The tonne, which trades at around US$975, was worth US$7,640 in January 2023. This plunge is notably attributable to what is happening in China – the market where we find the greatest number of electric vehicles.

Deliveries are expected to increase by 25% this year, according to data compiled by Bloomberg. This is growth, but it is not as marked compared to the increases of 36% (2023) and 96% (2022) seen over the past two years. This slowdown is putting pressure on demand for critical minerals used to make batteries.

“I found that the prices [du lithium] had risen really high in recent years, says Éric Lemieux, mining analyst at EBL Consultants. I found this unsustainable. When it skyrockets, several speculators and entrepreneurs become interested in the environment. I dare to hope that the good actors will be able to do well.”

Far from assumptions

At the North America Lithium complex – owned by Sayona (75%) and Piedmont Lithium (25%) – we are far from the mark when it comes to prices. According to a feasibility study released last April, the promoters were counting on an average price of US$1,352 per tonne over the life of the mine (20 years). The shortfall is around 30%.

Sayona says its restructuring does not affect its day-to-day operations at La Corne and that it is expected to complete its “operational review” by the end of March. It affirms that its intentions do not change with regard to the Authier (30 kilometers from Amos) and Moblan (north of Chibougamau) projects, which are not in operation. Mr. Jébrak, who anticipates a rise in prices, believes that the company nevertheless risks being faced with difficult choices.

In Quebec, the other major project in the lithium sector is that of Nemaska ​​Lithium. This company, owned equally by Quebec and Arcadium Lithium, wants to transform ore extracted from the Whabouchi mine, approximately 300 kilometers from James Bay, to then produce lithium hydroxide – essential in the manufacture of lithium batteries. ion for electric vehicles – in Bécancour.

Current prices per tonne of spodumene are far from the average of US$2,000 per tonne that Nemaska ​​Lithium believes it can obtain for its ore. The company is, however, more integrated than Sayona, as it will supply its own processing plant. In interview with The Pressearlier this month, Sarah Maryssael, general manager for Canada and head of global strategy for Arcadium Lithium, acknowledged that the industry was in a “much more difficult” market than a few years ago.

The two specialists consulted by The Press anticipate a rise in lithium prices. It remains to be seen when the current trend will be reversed. Mr. Jébrak believes that we should see an increase during the year. In the longer term, the outlook remains encouraging. Statista estimates that global demand for lithium is expected to double by 2030.

No rush

In the meantime, Arcadium Lithium, which also owns another deposit in the James Bay sector, does not seem to be in a hurry with this project. Several permits must be obtained before extraction can potentially begin. Large sums – up to 380 million – will have to be invested, according to current estimates.

“We have to review our project portfolio a little because with the merger, we now have projects in Argentina,” explained M.^me Marysael. This is what we must do before making a decision. »

Other Quebec projects involving lithium still have many steps to complete before reaching those of exploitation and production.

Thursday, Patriot Battery Metals, behind the Corvette property in James Bay, did not respond to questions from The Press. Despite the more difficult context, the company launched a new drilling campaign last week in order to “improve confidence in” its “geological model”.

Mr. Jébrak believes that these developers have time ahead of them to prepare their projects in order to be ready when prices rise. However, they will likely have to do their homework on their feasibility studies.