Guolian: Q2 Australian lithium production rebounded, and new mines are expected to contribute to the increase in output in the future.

Guolian released a research report stating that, according to statistics, the total lithium concentrate production volume from major mines in Australia in 2024 Q2 was 1.024 million tonnes, up 20.31% quarter-on-quarter and 20.04% year-on-year. The production increase mainly comes from the capacity ramp-up of low-cost mines. By the end of August 2024, Australia had commissioned two projects in 2024, namely the Mt Holland and Kathleen Valley projects, with lithium concentrate production capacities of 380,000 tonnes/year and 500,000 tonnes/year, respectively. The newly commissioned projects continue to ramp up production capacity, combined with the planned production ramp up of older projects. Even if individual small mines see a decline in production or shut down, Australia's lithium concentrate production volume is expected to continue to trend upward in the coming quarters. Guolian's main points are as follows: 2024 Q2 total production and sales volume of Australian mines increased quarter-on-quarter, with continuous contribution of increments from low-cost mines According to Guolian's statistics, in 2024 Q2, the total lithium concentrate production volume of major mines in Australia was 1.024 million tonnes (due to some companies not disclosing grade, only absolute numbers are added, not adjusted for the same grade), up 20.31% quarter-on-quarter and 20.04% year-on-year. Sales volume was 1.187 million tonnes, up 71.01% quarter-on-quarter and 36.34% year-on-year. The increase in production volume mainly comes from the ramp-up of capacity in low-cost mines, including the Pilgangoora project, capacity ramp-up at the Greenbushes mine, and the newly commissioned Holland mine in 2024, which also contributed a lot of increments. The significant increase in sales volume, in addition to the increase in production, is also related to increased demand from Greenbushes shareholders in the second quarter, which helped to reduce inventory. Two new mines commissioned in 2024, expected to continue releasing increments in the second half of the year By the end of August 2024, Australia had commissioned two projects in 2024, namely the Mt Holland and Kathleen Valley projects, with lithium concentrate production capacities of 380,000 tonnes/year and 500,000 tonnes/year, respectively. Mt Holland had produced approximately 110,000 tonnes of lithium concentrate in the first half of 2024, and had shipped two batches totaling approximately 20,000 tonnes of lithium concentrate. The plan for the 2025 fiscal year is to produce 300,000-340,000 tonnes. The Kathleen Valley project produced the first batch of lithium concentrate in July 2024 and will ship the first batch in 2024 Q3. Guolian believes that the newly commissioned projects will continue to ramp up production capacity, combined with older projects following planned ramp-ups. Even if production declines or stops at individual small mines, Australia's lithium concentrate production volume is expected to maintain a quarter-on-quarter upward trend in the coming quarters. Mainstream mines' cash costs remain controllable, while costs of newly commissioned mines still need to be observed According to disclosed data from various companies, the Greenbushes mine still has the lowest production cash cost at only $223 per tonne (adjusted for 6% grade), while the mainstream mines Pilgangoora, Marion, and Wodgina all have production cash costs below $700 per tonne. Finniss mine has lower costs mainly because it mainly processes original ore stockpiles, while Mt Cattlin has higher costs due to low mine grade and depleting resources. The Mt Holland and Kathleen Valley mines commissioned in 2024 are expected to have higher costs in the initial stages of production capacity ramp-up, and specific cash costs still need to be observed. Investment recommendations: Focus on companies with secure resources In the previous lithium cycle, lithium resource stocks bottomed out before lithium prices. Guolian believes that current lithium prices have fallen below the cash costs of some high-cost suppliers. Even if lithium prices have not yet bottomed out, the overall downside potential is very limited. In a low-price environment, high-cost production capacity will be gradually eliminated. After upstream capacity is cleared, lithium prices are expected to rebound. In the new cycle, targets with secure resources and increasing production volume year by year are more resilient. Recommended to focus on: Qinghai Salt Lake Industry (000792.SZ), Sinomine Resource Group (002738.SZ), Tianqi Lithium Corporation (002466.SZ), Yongxing Special Materials Technology (002756.SZ), etc. Risk warning: Fluctuations in lithium carbonate prices; geopolitical risks; risks of project production not meeting expectations.