SQM earmarks US$3.4B in spending by 2025 as profits soar

LITHIUM | Producer posted net income of US$3.9B in 2022

BY CECILIA JAMASMIE

Chile’s SQM (NYSE: SQM), the world’s second-largest lithium producer, said on Mar. 2 it had earmarked US$3.4 billion of new capital spending by 2025 to boost its production capacity to 210,000 tonnes of lithium carbonate equivalent a year, from current levels of 180,000 tonnes per year.

The hefty investment comes as the Santiago-based company reported soaring profits last year on the back of higher prices for the metal driven by rising demand from the electric vehicles (EVs) sector.

SQM posted net income of US$3.9 billion in 2022, an almost three-fold increase from the US$585.5 million it amassed in 2021.

Total revenues for the year hit US$10.7 billion compared to the almost $2.9 billion reported for the 12 months ended Dec. 31, 2021.

Lithium prices have skyrocketed — up by as much as 1,200% — over the past several years as supply has failed to match rampant demand. Car makers continue to scramble for the battery metals to make more EVs and comply with tougher climate rules from governments.

SQM noted it would invest $1.4 billion this year from the total planned for the 2023-2025 period , to increase its lithium capacity in Chile to 210,000 tonnes, including 100,000 tonnes of lithium hydrox- ide capacity. The copper-rich country currently generates about 29% of the world’s lithium supply, but it plans to double production by 2025 to about 250,000 tonnes of lithium carbonate equivalent.

Beyond Chile

SQM remains bullish on the longterm outlook for the lithium market. It now forecasts demand to reach almost 1.5 million tonnes by 2025.

“[These] strong demand growth expectations give us confidence as we remain focused on expanding our lithium production capacity,” CEO Ricardo Ramos said in a statement.

The firm announced in January an A$4.2 million (US$2.7 million) investment in Australia’s Azure Minerals (ASX: AZS), which made it the lithium junior’s largest shareholder. The company also said it planned to invest a further A$15.8 million (US$10.4 million) in Azure.

SQM has also partnered with Wesfarmers to develop the Mt Holland lithium asset in Western Australia. The project is expected to come online by the end of this year, with an initial production capacity of 50,000 tonnes of bat- tery grade lithium hydroxide. The lithium giant, which bought a refinery plant in southwest China last year, said the facility was expected to be completed in the second quarter of 2023. SQM’s plan is to produce lithium hydroxide from lithium sulphate sourced in Chile. TNM

TORONTO STOCK EXCHANGE / MARCH 6–10, 2023

Over the Mar. 6-10 trading period, the S&P/ TSX Composite Index cratered by 806.66 points or 3.9%, to 19,774.92. The S&P/TSX Global Mining Index lost 8.65 points or 7.5% to 106.48, and the S&P/TSX Global Base Metals Index fell 24.48 points or 11.6% to 186.46.

The S&P/TSX Global Gold Index contracted by 9.17 points or 3.34% to 265.27, and spot gold ended the week US$20.10 per oz. higher, or 1.09% higher, at US$1,861.25 per ounce.

Only a handful of miners could add value amid a generally tepid trading week on the markets. NioCorp Developments led the charge, closing 4¢ per share higher at $1.32 on Friday after announcing an expression of funding interest for its Elk Creek critical minerals project in Nebraska. The Export-Import Bank of the United States (EXIM) has signalled its interest in potential financing of up to US$800 million for the project. Should it be granted, the funding will be provided through EXIM’s “Make More In America” initiative. Niocorp also announced on Mar. 10 that its shareholders have approved a merger with GX Acquisition Corp. II and up to $81 million in financing deals to advance Elk Creek.

The biggest value loser was Teck Resources, soon to be rebranded as Teck Metals following the spin-out of its coal-focused business unit. The stock closed the week $8.06 lower at $84.63. In late February, Teck announced a plan to split the company into Teck Metals and Elk Valley Resources, which will hold its steelmaking coal business. Under the plan, Teck shareholders will receive 0.1 of a common share in Elk Valley Resources for each Teck share they hold plus 39¢ in cash per share. In exchange for the coal assets, Elk Valley Resources will make quarterly payments to Teck Metals consisting of royalty payments and preferred share redemptions through a transition capital structure.

The biggest percentage gainer was Excelsior Mining, which saw shares close out the week 12.8% higher at 27¢ apiece. The company recently published an updated preliminary economic assessment (PEA) for its

TSX VENTURE EXCHANGE / MARCH 6–10, 2023

The S&P/TSX Venture Composite Index retreated by 31.49 points or 4.9% over the Mar. 6-10 trading session, ending at 611.49.

Artemis Gold was the week’s top value gainer, adding 48¢ to close at $4.88 on Friday. On Mar. 9, Artemis announced the approval of its B.C. Mines Act permit for the Blackwater gold project in central B.C., the final step required to allow the company to begin major construction activities. It expects the initial gold pour at Blackwater in the second half of 2024. Located about 446 km northeast of Vancouver, the open-pit gold mine and ore processing facilities will be developed in multiple stages. Artemis is planning a 22-year mine life for Blackwater using gravity and conventional cyanidation methods for gold recovery. Over that period, it is expected to produce an average of 339,000 oz. of gold annually. Life-of-mine capital costs are estimated at $2.25 billion, beginning with $645.2 million to be spent before production begins next year.

The week’s top percentage gainer was Tajiri Resources, which closed 83.3% higher on Friday at 9¢ per share. The company reported further results of power auger drilling at its K4-5 prospect in Burkina Faso, saying it has the potential size and form to host a large to ‘supergiant’ gold deposit. According to a Mar. 7 news release, independent of its interpreted potential to host a large gold deposit, the geochemical anomalism now outlined by the saprolite auger campaign is said to be of a scale that is between two to nine times the size of similar tenor saprolite gold anomalies. Tajiri says comparable West African gold deposits have known resources of between 4 million and 7 million ounces.

The most active issue was Advance Lithium, which closed the week at 5¢ per share after 8.9 million shares changed hands during the trading week. On Mar. 9, the

U.S. MARKETS / MARCH 6–10, 2023

Stocks fell Mar. 6-10 as investors shifted from concerns over inflation to the outlook for the economy after regulators shut California-based Silicon Valley Bank following losses that prevented it from maintaining enough capital.

The Dow Jones Industrial Average fell 1,481.33 points or 4.4% to 31,909.64 and the S&P 500 dropped 184.05 points or 4.5% over the week to 3,861.59.

Two companies seen as proxies for the wider economy were among the top mining and metals industry decliners during the week. Aluminum producer Alcoa plummeted 19% to US$44.91 per share. Steelmaker Cleveland-Cliffs fell 15% to US$19.37 per share.

Pittsburgh-based Alcoa struggled last year with inflation on inputs, posting a loss of US$102 million. “Global turbulence negatively influenced costs for energy and raw materials and we saw significant variance on product pricing between the first and second halves of 2022,” Alcoa president and CEO Roy Harvey said in January.

Cleveland-Cliffs, the largest flat-rolled steel producer in North America and the biggest supplier of steel to the continent’s auto industry, announced on Mar. 6 that it’s raising its rolled steel prices by about 9%. That followed price increases for its steel plate products in the previous week. Last month the company reported net income fell by more than half to US$1.4 billion last year due to higher costs and lower sales.

Hudbay Minerals tumbled 16% to US$4.55 per share. Production continues at its Constancia copper mine in Peru, which has suffered widespread protests and highway blockades affecting mining operations since the ouster of president Pedro Castillo in December, the company reported last month. Hudbay was left with 25,000 tonnes of copper concentrate unsold in Peru at the end of the fourth quarter, it said.

Still, the Toronto-headquartered miner posted record gold production in Peru during the fourth quarter and said it was able to keep company-wide operating costs last

Johnson Camp open pit, heap-leach copper project in Arizona. The PEA considers the results of the 2022 drill program and incorporates sulphide leaching technology to improve recoveries. The study estimated an after-tax net present value and internal rate of return at a 7.5% discount of US$180 million and 30.4%, respectively. The project would have a 20-year mine life. As part of the

PEA, the company republished a prefeasibility study update on the North Star deposit of the Gunnison copper project, which is designed as a copper in-situ recovery mine using solvent extraction-electrowinning to produce copper cathode. That study showed an after-tax NPV of US$1.2 billion (at a 7.5% discount), IRR of 37.5% and an initial capex of US$47.6 million. TNM company announced an agreement to acquire all of Wolfden Resources’ Bathurst Mining camp claims in New Brunswick. The deal gives Advance a foothold in the historical mining camp, including historic resources, and several metal showings that are near producing mines. Advance considers the package prospective for “a huge opportunity for a major discovery.” The deal allows Wolfden to unlock potential value from the Tetagouche property while maintaining the focus on the cornerstone Pickett Mountain project across the border in Maine. Subject to exchange approval, Advance will issue to Wolfden 19.9% of its outstanding shares at 5.5¢ each. TNM year comparable to 2021 despite decadeshigh inflation.

Lithium Americas, which this month began building its US$4-billion Thacker Pass project in Nevada, slid 14% to US$20.82 per share. Construction was allowed to start after a federal court ruled last month the project wouldn’t cause unnecessary harm to the environment and wildlife.

The proposed mine stands to be a major source of lithium in U.S. President Joe Biden’s critical minerals strategy to develop alternatives to relying on metals from China.

Automaker General Motors has pledged to invest US$650 million in the project. Thacker Pass and another project in Nevada, Ioneer’s Rhyolite Ridge lithium-boron asset northwest of Las Vegas, are being considered for hundreds of millions of dollars in loans from the country’s department of energy. TNM