IGO sees no path forward for WA lithium refinery

While the lithium market looks to be in the early stages of a recovery, IGO (ASX: IGO) has no faith in the prospects for a recovery at the Kwinana lithium refinery in Western Australia.Kwinana, south of Perth, is owned by Tianqi Lithium Energy Australia (TLEA), which is 51% owned by China’s Tianqi Lithium (SHE: 002466) and 49% by IGO.In January, TLEA announced it would suspend the construction of the second train of the Kwinana plant amid the struggle to reach nameplate capacity at Train 1.IGO CEO Ivan Vella told the company’s annual general meeting in Perth on Wednesday that the company continued to negotiate with Tianqi on the future of the facility.“It would be great if it had worked. It would be great if we had found a pathway,” he told shareholders.“We don’t see that pathway there, so we made the decision on Train 2, and we’re working through Train 1 with Tianqi.“That is complicated, because they see the world differently, and we’re doing that in a respectful way. The joint venture is very important to us. That relationship is key. We need to continue to step through the through the challenges there in an appropriate manner.”Tianqi has previously said it had no plans to suspend the refinery, despite IGO’s position.IGO reported a A$605 million ($393 million) impairment on Kwinana in its full-year results, reported in August.‘Not working’Vella praised the TLEA team for leaving “no stone unturned” in trying to improve the performance of Kwinana.“And yet, through the year, 35% of nameplate capacity, after three years – it is just not working,” he said.The plant showed signs of improvement in the September quarter, reaching 46% of nameplate capacity, though it delivered an earnings before interest, tax, depreciation and amortization (EBITDA) loss of A$19.6 million.Production increased by 31% to 2,775 tonnes of hydroxide, while conversion costs fell by 18% to A$14,177 per tonne.Vella said IGO had benchmarked Kwinana against other plants globally and determined it was a “challenged asset”.“It’s not something that we think is worth chasing down the road and trying to solve,” he said.“If it was nameplate today, we still don’t believe that it would be economic and that’s not a function of that particular asset. That’s a function of what it means to do downstream processing in Australia.“When you look at the energy costs, when you look at the labor costs, when you look at the lack of broader clusters of capability around these assets, it is difficult, so for those in the space of downstream, it’s a very, very challenging world.“Returns are low, and when you have a challenged asset, you combine the two. We think that leads to a pretty difficult outcome.”A shareholder asked if the improvement in lithium prices would get the refinery to at least a break-even point, but Vella said it was about processing costs more than lithium prices.“If you’re more than two or three or more times than that cost for the processing, that erodes any potential margin,” he said.“So even as the cycle moves, it becomes very challenging to maintain the competitiveness when your underlying costs there are so high.“The last thing we want to do is continue to invest in what, even at the best lithium price, is still a low return asset.”Greenbushes has more to giveTLEA also has a 51% stake in the Greenbushes mine in WA in joint venture with Albemarle Corporation (NYSE: ALB).Greenbushes is widely considered to be the best and lowest cost hard rock lithium mine globally.“We’ve continued to show this is a tier one mining asset,” Vella said.“It’s as good as it gets for an orebody in lithium, for sure, but one of the best of any mine that I’ve seen.”Greenbushes produced 1.48 million tonnes of spodumene concentrate at unit costs of A$325/t in the 12 months to June 30, 2025, generating cashflow of A$1.5 billion and an EBITDA margin of 66%, which Vella described as “unbelievable”.Vella said the asset was far from full potential and further optimization work was underway.“For me, it’s something that I’ve not seen before – the level of opportunity,” he said.“There are certainly some analysts who say to me, ‘it’s the lowest cost asset on the planet, in lithium. How can it really get that much better?’ And I can assure you, I get delighted every time I look at the work they’re doing.”Chemical grade plant 3 is on track for commissioning and first ore by the end of the year, which will boost capacity by a further 500,000t per year.“Never has the timing been so perfect into a rising market, so that’s a joy,” Vella said. “You don’t get to plan that, but it’s nice when it works out.”Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com