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Arcadium Lithium (ASX:LTM), a US-Australian lithium giant, is adapting to market conditions by pausing hard rock developments in Canada and planning to close the Mt Cattlin mine in Western Australia next year. Despite these adjustments, the company remains optimistic about achieving its growth targets, anticipating a market deficit for lithium—crucial for electric vehicles—starting in 2027.
Strategic Moves and Financial Goals
LTM aims to deliver US$125 million in merger-related cost savings two years ahead of schedule. The company plans to double its sales volumes by 2028, projecting an increase in EBITDA from US$525 million to US$1.3 billion within that timeframe. The decision to close Mt Cattlin is expected to preserve US$75–100 million, while further cutbacks will likely involve underground methods and potential sales to third parties for above-ground infrastructure.
In a recent presentation, CEO Paul Graves noted that production could still grow by 25% in 2024 and 2025, thanks to previous investments that no longer require additional capital.
Key Assets and Production Capacity
LTM's primary assets include the Fenix and Olaroz brine projects in Argentina. The Fenix project has a capacity of 32,000 tonnes per annum (tpa) of lithium carbonate, with operating costs between US$5.5 and US$6.5 per kilogram. Meanwhile, Olaroz boasts a capacity of 43,000 tpa at costs ranging from US$6.5 to US$7.5 per kilogram.
Additionally, the Sal de Vida brine project, located in the Hombre Muerto Salar, has US$280 million in capital expenditures remaining for its initial 15,000 tpa phase. A further US$340 million is earmarked for a phase 1B expansion of 10,000 tpa at Fenix, with significant future investments anticipated to expand total production.
Outlook on Lithium Prices
Analyst estimates presented by LTM suggest a gradual recovery in lithium carbonate prices, expected to rise from US$13.3 per kilogram in 2025 to US$18.6 in the long term. For spodumene, prices are projected to range from US$1,077 per tonne in 2025 to around US$1,400 per tonne in 2028.
With these price increases, LTM anticipates turning free cash flow positive after capital expenditures by 2028, projecting free cash flow of $470 million at a declining net leverage ratio.
Partnerships and Production Enhancements
In another significant development, LTM has reached an agreement to supply lower-quality technical grade carbonate from the Olaroz project to Toyota Tsusho for processing into lithium hydroxide at their jointly owned Naraha plant in Japan. This partnership is expected to enhance earnings by freeing up battery-grade lithium carbonate for other customers.
Develop Global (ASX:DVP) Moves Towards Production
In related news, Develop Global is gearing up to produce copper and zinc from its Woodlawn project in New South Wales by mid-2025. The company has contracted GR Engineering Services (ASX:GNG) to upgrade its plant, triggering a US$20 million payment to Orion Mine Finance, the operation's vendor. This will be financed through a share placement and the issuance of shares to Orion.
DVP is also on track to finalize a US$100 million prepayment/loan facility with Trafigura, ensuring the Woodlawn project is fully funded for production. The company has resumed underground development to accelerate progress, with forecasts indicating significant cash flow and returns over the project's seven-year life.
Arcadium Lithium and Develop Global are navigating the complexities of the current market while strategically positioning themselves for future growth. With solid asset bases and ambitious plans, both companies are focused on capitalizing on the increasing demand for lithium and metals essential for the electric vehicle industry.
