According to statistics, in Q2 2025, major Australian mines produced a combined 1.0122 million tons of lithium concentrate, up 12.1% quarter-over-quarter, with sales reaching 1.0703 million tons, up 16.8% quarter-over-quarter. New projects commissioned in 2024 are still in the capacity ramp-up phase, with overall performance falling short of expectations. Based on data disclosed by various companies, Q2 2025 mainstream mines maintained relatively low cost levels, with cash costs generally below $600 per ton. Considering that cost reduction measures for Australian mines mainly involve reducing labor costs, improving feed grade, and optimizing processing flows, after several quarters of cost optimization and control, the room for further cost reduction at mainstream Australian mines has been significantly compressed, with some mines even showing upward cost trends.
**Q2 2025 Production Recovery Quarter-over-Quarter, New Project Output Below Expectations**
According to statistics, in Q2 2025, major Australian mines produced a combined 1.0122 million tons of lithium concentrate (due to some companies not disclosing grades, absolute numbers were simply added without converting to equivalent grades, excluding Cattlin mine), up 12.1% quarter-over-quarter, with sales of 1.0703 million tons, up 16.8% quarter-over-quarter. The quarter-over-quarter production recovery was mainly due to Pilbara not being affected by extreme weather, while the commissioning of the P1000 project significantly boosted production.
New projects commissioned in 2024 are still in the capacity ramp-up phase, with overall performance falling short of expectations. Both Holland mine and Kathleen Valley mine had production below previous expectations in fiscal year 2025. Kathleen Valley is advancing transformation, transitioning from the parallel open-pit and underground mining model in fiscal year 2025 to 100% underground mining production. Fiscal year 2026 production guidance shows growth of 24%-53% compared to fiscal year 2025 results.
**Low Lithium Prices in 2025 Put Pressure on Newly Commissioned Mine Costs**
Holland mine continues to operate at a loss, while Kathleen Valley costs have surged. Australia commissioned two projects in 2024, namely Mt Holland and Kathleen Valley projects, with lithium concentrate capacities of 380,000 tons per year and 500,000 tons per year respectively. Due to excessively low lithium prices, Mt Holland has operated at a loss for two consecutive fiscal years since commissioning, and losses are expected to further expand in fiscal year 2026. Kathleen Valley conducted open-pit mining in Q2 2025, where low-grade ore led to decreased recovery rates and surging costs, up 12.5% quarter-over-quarter compared to Q1 2025. As fiscal year 2026 marks the company's mining strategy transformation year, the guided cost of AUD 855-1045 per ton is significantly higher than the second half of fiscal year 2025 (AUD 775-855 per ton). During the sustained lithium price bottom-grinding phase, newly commissioned mines will face greater pressure on the cost side.
**Mainstream Mine Cash Costs Mixed, Limited Room for Cost Reduction**
Based on data disclosed by various companies, Q2 2025 mainstream mines maintained relatively low cost levels, with cash costs generally below $600 per ton. Considering that cost reduction measures for Australian mines mainly involve reducing labor costs, improving feed grade, and optimizing processing flows, after several quarters of cost optimization and control, the room for further cost reduction at mainstream Australian mines has been significantly compressed, with some mines even showing upward cost trends. Limited further cost reduction space is expected for Australian mines going forward, and lithium price declines will impact Australian companies' operations.
**Investment Recommendations**
In the previous lithium cycle, lithium resource stocks bottomed out before lithium prices. Current lithium prices have reached the cash costs of high-cost suppliers, significantly intensifying supply risks, while downstream demand remains robust. In the new cycle, targets with guaranteed resources and year-over-year production increases offer greater elasticity. Recommended focus: Salt Lake Co Ltd (000792.SZ), Sinomine Resource Group Co Ltd (002738.SZ), Yongxing Special Stainless Steel Co Ltd (002756.SZ), among others.
**Risk Warning**
Lithium carbonate price volatility risk; geopolitical risks; risk of projects under construction not meeting production expectations as scheduled.