Guolian Minsheng Securities: 25Q2 Australian mining new project output lower than expected, mainstream mine cost reduction space compressed

According to the Zhitong Finance APP, Guolian Minsheng Securities released a research report stating that in Q2 2025, the total lithium concentrate production of major mines in Australia reached 1.0122 million tons, a quarter-on-quarter increase of 12.1%; sales reached 1.0703 million tons, a quarter-on-quarter increase of 16.8%. New projects launched in 2024 are still in the capacity ramp-up phase, and overall performance is below expectations. From the data disclosed by various companies, the costs of mainstream mines in Q2 2025 remain at a low level, with cash costs generally below USD 600 per ton. Considering that the main measures for cost reduction in Australian mines are to reduce labor, improve feed grade, and optimize processing flows, after several quarters of cost optimization and control, the space for cost reduction in mainstream Australian mines has significantly compressed, and some mines have even shown a trend of rising costs. The main points of Guolian Minsheng Securities are as follows: Production in Q2 2025 shows a quarter-on-quarter recovery, new project output is below expectations According to Guolian Minsheng Securities statistics, in Q2 2025, the total lithium concentrate production of major mines in Australia reached 1.0122 million tons (as some companies did not disclose grades, only absolute numbers were added, not adjusted for the same grade, excluding Cattlin mine), a quarter-on-quarter increase of 12.1%; sales reached 1.0703 million tons, a quarter-on-quarter increase of 16.8%. The quarter-on-quarter recovery in production is mainly due to Pilbara not being affected by extreme weather, and the P1000 project coming online, significantly boosting production. New projects launched in 2024 are still in the capacity ramp-up phase, and overall performance is below expectations, with both Holland mine and Kathleen Valley mine producing below previous expectations in the 2025 fiscal year. Kathleen Valley is advancing its transformation, transitioning from a dual-mode of open-pit and underground mining in the 2025 fiscal year to 100% underground mining production. The production guidance for the 2026 fiscal year is expected to grow by 24%-53% compared to the results of the 2025 fiscal year. Lithium prices remain sluggish in 2025, new mines face cost pressures Holland mine continues to incur losses, and Kathleen Valley's costs have surged. In 2024, Australia launched two projects, namely the Mt Holland and Kathleen Valley projects, with lithium concentrate capacities of 380,000 tons/year and 500,000 tons/year, respectively. Due to low lithium prices, Mt Holland has incurred losses for two consecutive fiscal years since coming online, and losses are expected to further expand in the 2026 fiscal year. Kathleen Valley experienced a decline in recovery rates due to low-grade ore mined in Q2 2025, leading to a cost surge, which increased by 12.5% compared to Q1 2025. As the 2026 fiscal year is a year of transformation for the company's mining strategy, the guided costs of AUD 855-1045 per ton are significantly higher than the second half of the 2025 fiscal year (AUD 775-855 per ton). During the ongoing bottoming phase of lithium prices, new mines will face more challenges on the cost side. Mainstream mines show mixed cash cost trends, limited room for cost reduction According to the data disclosed by various companies, the costs of mainstream mines in Q2 2025 remain at a low level, with cash costs generally below USD 600 per ton. Considering that the main measures for cost reduction in Australian mines are to reduce labor, improve feed grade, and optimize processing flows, after several quarters of cost optimization and control, the space for cost reduction in mainstream Australian mines has significantly compressed, and some mines have even shown a trend of rising costs It is expected that the further cost reduction space for Australian mines will be limited, and the decline in lithium prices will impact the operations of Australian companies. Investment Recommendations In the last lithium cycle, lithium resource stocks bottomed out before lithium prices. Currently, lithium prices have reached the cash costs of high-cost suppliers, and supply risks have significantly increased, while downstream demand remains strong. In the new cycle, targets with guaranteed resources and increasing production year by year are more resilient. It is recommended to pay attention to: Qinghai Yanhu Industry (000792.SZ), SINOMINE (002738.SZ), and Yongxing Materials (002756.SZ), among others. Risk Warning Risks of lithium carbonate price fluctuations; geopolitical risks; risks of underperformance in the commissioning of ongoing projects