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Resource cutbacks hit WA’s mining sector hard

The cutbacks in resources continue, especially in Western Australia (WA), with the nickel and lithium sectors bearing the brunt of spending reductions, mine closures, and the suspension of exploration activities.

This is due to nickel prices plummeting by 50% in the past year, while lithium prices for spodumene, the hard rock ore for hydroxide, have dropped by over 80%.

The only major commodities not affected by cuts so far are iron ore and gold.

Copper is under pressure, but the outlook seems to improve with the closure of the Cobre Panama mine by Canada’s First Quantum, which is expected to shift the global output from surplus to a small deficit.

Chalice Mining, based in Perth, recently announced significant cost-cutting measures, including staff reductions and reduced spending on its core Gonneville-Jalimar project. They aim to save over $30 million annually with a 40% cut in monthly spending, while still holding $112 million in reserves.

Chalice’s shares have fallen by 81% in the past year due to lower nickel and palladium prices.

Wyloo Metals, a private company owned by Twiggy Forrest, is closing its WA nickel mines indefinitely, adding to the industry’s woes.

These closures follow decisions by First Quantum of Canada, Panoramic Resources, and Albemarle, the world’s largest lithium group, to reduce operations and investments in the region.

Alcoa is also closing its Kwinana alumina refinery, resulting in job losses for hundreds, if not thousands, of workers in WA.

Chalice stated on Monday that they expect a 40% reduction in expenditures in 2024 compared to 2023, including material reductions in executive salaries and corporate costs.

Despite the cost-cutting measures, Chalice remains committed to its Gonneville Project’s development schedule and ongoing exploration activities.

Budgeted activities for 2024 include ongoing work on the Gonneville Mineral Resource Estimate, pre-feasibility studies, metallurgical testing, and infrastructure development.

Chalice anticipates that the expenditure reduction will not impact the targeted completion of the Gonneville Project’s pre-feasibility study in mid-2025 or the expected Final Investment Decision in late 2026.

The company is also making progress in identifying potential strategic partners for the Gonneville Project, further reinforcing its long-term value and strategic importance. Discussions with potential partners are ongoing, with the aim of selecting a preferred partner in early 2024.