Mineral Resources chief Chris Ellison chasing more government incentives to secure lithium plants
Sean SmithThe West Australian
Fri, 24 February 2023 11:59AM
Mineral Resources’ Wodgina lithium mine in the Pilbara. Credit: Supplied
Mineral Resources boss Chris Ellison has warned that Australia risks losing out to more generous countries unless the Albanese Government steps up its financial backing for downstream processing of battery minerals.
The WA group wants to develop a lithium hydroxide plant in the Pilbara but its joint venture partners, US group Albemarle and China’s Ganfeng, are baulking at the extra cost that comes with building in Australia.
Mr Ellison on Friday said Australia’s emergence as a major player in downstream lithium processing was being threatened by the more attractive incentives being offered elsewhere to lure the plants the Western World needs to reduce its reliance on China’s for battery metals.
MinRes’s lithium partners, he said, were “being offered grants to build in Europe and to build in the US and to build in places like Vietnam from the American government”.
“So we need the Australian government to come to the party on that, or I have zero chance of getting these guys through the door,” Mr Ellison said.
He wants the Government to help with more long-term low interest loans, tax breaks and accelerated approvals for lithium and other projects seen helping with the transition to cleaner transport and energy.
“We’ve had really good discussions, there’s a high degree of willingness to provide some assistance, but we’re just not sure what that looks like yet,” he said.
Mr Ellison said it had cost Albemarle “well north” of $US1.5 billion to build its 50,000-tonnes-a-year lithium hydroxide plant at Kemerton, near Bunbury.
“They can replicate that same plant in China for $US600 million. Other parties I know can do it for less,” he said.
His comments came as MinRes unveiled a $390 million interim profit that was underscored by record lithium earnings and followed Thursday’s news of the company’s proposed purchase of half-shares in two plants in China from Albemarle.
The billionaire admitted the investment in China was a risk given geopolitical and trade tensions that have clouded Australia’s relationship with its biggest trading partner over the past three years.
“There is no question there is a risk for an Australian company operating in China, but we think that we can manage that in the short to medium term,” he said.
“I haven’t lost my desire one bit to build whatever I can here in WA.”
The profit result, described by Mr Ellison as “fairly decent”, marked a significant recovery after last year’s earnings collapse to $20m on plunging iron ore prices and was accompanied by a reinstated interim dividend of $1.20 a share.
He also used the announcement to reveal that MinRes is looking at an international expansion of its mining services division, with management eyeing at least one major contract overseas.
With the $16b group now widening its footprint in high-margin downstream processing of the spodumene it is turning out in the Pilbara, MinRes is evolving from the mining services company established 30 years ago into a major supplier of lithium battery chemicals to auto makers.
“Over the past 12 months, the business has been restructured for growth in each of our four business pillars,” Mr Ellison said.
“We have locked in substantial growth in each of these business divisions for the next five years and built the foundations that will set up MinRes for the next 50 years.
MinRes’s revenue jumped 74 per cent to $2.35 billion, fuelled by increased volumes of spodumene concentrate and lithium hydroxide and higher prices linked to its Mt Marion lithium project.
With increasing spodumene from the expanding project converted into the higher-value hydroxide under MinRes’ tolling deal in China with co-owner Ganfeng, MinRes’s share of profits leapt to $584m before interest, tax, depreciation and amortisation from $67m previously.
Similarly, the Wodgina project, owned in partnership with US group Albemarle, swung from a $6m loss to a $177m profit.
All up, lithium accounted for three-quarters of MinRes’ $939m in underlying EBITDA, which was up sixfold.
Mr Ellison said lithium demand remained “incredibly high” and took a shot at analysts who had suggested an oversupply of the battery metal, suggesting they had underestimated the time it took to bring a new mine on stream.
The first half had set the group up to do significantly better for the rest of the year.
“This financial year is set up for a strong run home, with the pieces in place for an exciting second half that should deliver even better results, as we consistently do,” Mr Ellison said.
A higher realised average price of $US84 a tonne for the 8.7 million tonnes of iron ore shipped from its Yilgarn and Utah Point hubs during the December half-year lifted the group’s revenue from the steel-making commodity 10 per cent to $973m.
The division finished back in the black with a $37m profit after a $104m loss previously.
It also disclosed that a production start on its $3b Onslow Iron project in the Pilbara had been pushed back from late-2023 into 2024 because of approval delays, including around WA’s new indigenous heritage protection laws.
Higher costs for labour and parts constrained the foundation mining services division, where profit fell $26m to $255m, despite improved revenue of $1.2b.
MinRes will pay $US600m for the Chinese lithium investment, subject to Chinese regulatory approval.
The move was unveiled along with the long-overdue finalisation of the revamp of the companies’ WA lithium partnership over Wodgina the Kemerton lithium hydroxide plant recently completed by Albemarle.
As flagged last year, the restructure of the companies’ partnership sees Albemarle’s share of Wodgina reduced from 60 per cent to 50 per cent, while its ownership of Kemerton jumps to 85 per cent from 60 per cent.
Mr Ellison said on Friday the revamp had created a “much more balanced” venture that included MinRes taking responsibility for marketing its own lithium for the first time.
(20min delay)