Ellison delivers brutal wake up call to grumbling Atlas shareholders AFR, May 27 2018
Mineral Resources managing director Chris Ellison has smacked down Atlas Iron shareholders grumbling about a $280 million all-scrip takeover linked to his ambitions in lithium.
The Australian Financial Review rich lister said some of the comments were disappointing given the dire outlook for Atlas as it burns cash amid widening discounts for its low grade iron ore.
Mr Ellison shed light on how the Atlas Iron acquisition will help MinRes advance its world-class Wodgina lithium project in Western Australia, saying he needed the Atlas workforce and its wharf space at Utah Point in Port Hedland.
He also revealed MinRes was likely to build two 28,000 tonne-a-year lithium hydroxide processing modules at Wodgina as a minimum at an estimated cost of $300 million for each module.
The Atlas board have backed the all-scrip offer lobbed by MinRes last month at an implied premium of 59 per cent on the last closing price of Atlas stock.
That hasn't been enough to stop some small retail investors, who have ridden the Atlas highs and lows, taking to social media to attack the offer.
Mr Ellison said the deal, which will require the support of three quarters of Atlas shareholders, was on track, but admitted he was annoyed by the criticism from a portion of Atlas shareholders.
"It is just a slow process, the one that we have chosen, just because there are almost 32,00 retail shareholders," he said.
"It is painstaking and not great sitting watching social media and some of the comments coming out.
"The majority (of shareholders) seem to be happy that we are going to do something because obviously if we don't do something, they are sitting there burning cash at the moment at a rate of about $7 million a month so at a point in time they will become insolvent."
In a wake up call to Atlas recalcitrants and the wider industry, Mr Ellison said he saw no room for iron ore juniors in the Pilbara in the short to medium term.
MinRes announced this month that it was looking for equity partners to take up to 49 per cent of the Wodgina project, which analysts have speculated could be worth more than $3.6 billion.
It has been mining direct-shipping ore at Wodgina for more than 12 months and pushing ahead with open pit pre-strip and construction of a concentrate plant designed to produce 750,000 dry tonnes a year of 6 per cent spodumene concentrate.
Mr Ellison said MinRes wanted the Atlas workforce as the number of jobs at Wodgina increased from 700 to more than a 1000 and the Atlas wharf space known as Stockyard 2 at Utah Point.
"We have got a powerhouse with our lithium business at the moment," he said.
"So I need the people, I need that wharf space and I need to build a big negative pressure shed to make sure we don't have any environmental issues. They are my first couple of things I want to get done."
A pre-feasibility study into construction of a lithium carbonate or hydroxide plant at Wodgina is being finalised with MinRes expected to start building late this year.
Mr Ellison said the economics of building lithium processing assets at Wodgina stacked up well against similar projects planned by Chinese company Tianqi, US-based Albemarle and a Kidman Resources-SQM joint venture for south of Perth.
The merits of Wodgina included construction of a airport to land A320 jets and a 1000-person mining camp, an abundant water supply, power costs of less than 15 cents-a-kilowatt hour and heavy haulage efficiencies in trucking product about 100 kilometres via a sealed road to port.
MinRes plans to run a 10-inch pipeline from existing gas supply infrastructure in the Pilbara to its Wodgina power station.
AGO Price at posting:
3.0¢ Sentiment: Hold Disclosure: Held
