Keliber in FinlandSOUTH African miners’ appetite for offshore production has manifested in a spate of deals for mothballed mines and even producing ones. Some have legacy challenges. Many are in Australia.
That’s true even for precious metals miner Sibanye-Stillwater. But the company also stands out for having raised the curtain on Keliber, a greenfields lithium mine in western Finland, in April.
Establishing a mine from scratch in just five years, at a total investment cost of R18.9bn, represents short (though expensive) work in any miner’s book. For it to be Europe’s first integrated producer of the battery metal is truly remarkable.
“Despite concerns that Sibanye would be a fish out of water in trying to build a greenfield project in Finland, progress is encouraging,” said RBC Capital Markets analyst Ben Davis, who visited the site last month. “Now comes the hard part,” he added — a reference to the familiar “delta” in every miner’s life where concept meets production reality.
First production of the concentrate spodumene is scheduled for the third quarter. A second-stage refinery has also been built, but there’s less clarity about when Sibanye-Stillwater can open it — possibly in 2028, when lithium hydroxide prices can support it.
According to the Bloomberg global commodity lithium index, prices for lithium were buoyant in the early planning stages of Keliber, but then more than halved from mid-2023 to the end of last year owing to oversupply.
There’s been a significant recovery this year to over $20,000/t, enough to support profitable production from Keliber. But a combination of execution and market risk means analysts remain only cautiously positive about the project.
Sibanye-Stillwater CEO Richard Stewart says the compan has planned for a largely balanced market during this time. From 2030, however, he thinks lithium will go into deficit, which is when the project will fully come into its own.
Before then, Sibanye-Stillwater is hoping the EU will support its idea for a floor price similar to the industry support given by the US government to its rare earths industry. Washington guaranteed prominent local rare earths producer MP Minerals a price of $110/t when China supplies at prices below that floor.
China is nearly as dominant in lithium as in some rare earths.
Analysts question whether Sibanye-Stillwater will get that support from the EU. “We have little conviction that the company will be able to secure any floor pricing or other incentives from the EU, given limited progress so far,” said RMB Morgan Stanley analysts Brian Morgan and Christopher Nicholson in a recent report.
The EU has not been especially proactive in securing critical mineral supply lines, despite the European Critical Raw Materials Act of 2023 (CRMA), which set targets that included extracting at least 10% of the annual consumption of key elements and processing 40% of them. In particular, the bloc has been left behind in adapting policy to cater for mineral demand spikes — for instance for munitions. An absence of political will and limited finance have been cited as reasons.
“Markets are naturally suspicious of the EU ever coming close to the proactive and strategic approach taken by the US and China, particularly when it comes to establishing supply chains. But if there has ever been a moment, it’s now,” said Davis. Despite Keliber being an EU strategic project in terms of the CRMA, it has received minimal early-stage EU support so far.
Other challenges also loom for Stewart. One is getting product qualification for the spodumene. Sibanye-Stillwater is working on six to nine months, but Davis notes that a German rival waited two years.
Resilience
For Sibanye-Stillwater more broadly, Keliber is an integral cog in proving its resilience as an investment. A heartening rebound in earnings for the 12 months to end-December and the reinstatement of the dividend were positives driven by the leverage of the firm’s South African platinum and gold production.
What Stewart is seeking to highlight is the so far ignored potential in the company’s offshore division. This includes the US-based palladium-dominant mine Stillwater, which is targeting all-in sustaining costs of $1,000/oz without relying on US subsidies.
Sibanye-Stillwater has major US-based recycling capacity as well. Both assets are unappreciated, said Stewart.
BMO Capital Markets analyst Raj Ray said: “Recycling is emerging as higher quality and more resilient than previously assumed, while the US platinum group metals [PGM] business appears positioned for cyclical recovery post reset.”
The Keliber site visit clearly worked to convince some investors, but they may have to wait for the value to come through. “While the long-term rationale is clear, we continue to view the international and battery metals business as a work in progress, with ramp-up and execution risks implying a near-term cash drag,” said Ray.
“Encouragingly, stronger PGM, gold and lithium prices should support improved cash generation from the PGM and gold operations in South Africa, [to] provide a buffer as the broader portfolio matures.”