Billionaire MinRes boss charts new course for lithium

Mineral Resources is in talks with car makers about joining forces in lithium after ditching battery chemicals giant Albemarle as a partner in processing as it tries to divert its mineral output away from China.

Billionaire MinRes boss Chris Ellison is also confident he can convince the West Australian government to lift a controversial ban on LNG exports from onshore gas projects after telling politicians his company stands ready to invest billions in the Perth Basin.

Chris Ellison launched a broadside at China last month after pulling out of a billion-dollar deal on lithium processing there in partnership with Albemarle.

Mr Ellison admitted on Tuesday that the company was making up its lithium strategy as it went along, but now wanted to sell directly to car makers, rather than battery manufacturers and chemicals producers.

He said MinRes was “talking to the heads of a range of different vehicle manufacturers”.

“They are very keen to get something bedded down. We are taking our time because there is no rush.”

Mr Ellison said “credible and well-funded” entities were offering MinRes free carry into lithium hydroxide plants planned for Germany and the United Kingdom, where lithium spodumene is refined into high-grade product.

The latest iteration of the MinRes strategy is to produce a saleable lithium product through a plant in South-East Asia or Australia, to have that converted to hydroxide elsewhere, and then sell to the automotive industry.

MinRes is lobbying for government support to build a plant producing a lithium phosphate or sulphate material in WA after previously being one of the loudest voices seeking backing for onshore lithium hydroxide plants and a domestic battery-making industry.

The MinRes share price jumped more than 6.5 per cent to $68.60 on Tuesday. It was as high as $97 in January.

MinRes suffered a big drop in annual profits after a $552 million write-down on its iron ore operations and despite record earnings from its lithium division.

Mr Ellison foreshadowed shutting down the Yilgarn iron ore operations within three years and indicated the future of the Utah Point hub hinged on a partnership with Gina Rinehart’s Hancock Prospecting involving new mines and port facilities. Hancock assets are located in the same region.

On the lithium front, MinRes is set to branch out into underground mining at the Mt Marion mine in WA it owns in partnership with China’s Ganfeng.

The company also promised an update as soon as the end of this week on what appears to be a consolidation play in the broader region. MinRes built up a near 17.5 per cent stake in Delta Lithium and backed Bill Beament’s Develop Global in a deal to acquire Essential Metals and its Pioneer Dome lithium project near Kambalda.

Impairment charges on iron ore operations

MinRes posted a net profit of $244 million, down by $107 million on 2021-22. Revenue jumped 40 per cent to almost $4.78 billion and underlying EBITDA was up 71 per cent to $1.8 billion. The company declared a fully franked final dividend of 70¢ a share.

Underlying EBITDA of $185 million from the iron ore business excluded $787 million of non-cash, pre-tax impairment charges mainly on assets related to the Utah Point and Yilgarn iron ore operations.

MinRes said the impairment stemmed from a revised estimate of the iron ore available to be mined at current forecast consensus prices combined with an increase in operating costs. Iron ore futures traded in Singapore were fetching $US110.70 a tonne on Tuesday.

The mining services business contributed $484 million to underlying earnings, down from $531 million.

Underlying earnings from the Wodgina lithium mine, which is owned in partnership with Albemarle, jumped from $13 million last year to $425 million. The Mt Marion mine produced underlying earnings of $911 million, from $578 million, after a near doubling in the price received for spodumene concentrate.

Mr Ellison launched a broadside at China last month after pulling out of a billion-dollar deal on lithium processing there in partnership with Albemarle. MinRes is yet to resolve how its lithium will be processed if it is not sent to mainland China.

As part of the WA’s Labor government domestic gas reservation policy, LNG offshore operators are supposed to set aside 15 per cent of production for the local market.

“We’ve had some good discussions with the government. We need to be able to export gas as LNG if we’re going to go and pump a couple of billion dollars into development,” Mr Ellison said.

“WA has always been very commercially astute. They listen to industry, so we think that we’re going to have some success along that line.”