Chinese favoured for MinRes deal. Leading Chinese lithium producer Shandong Ruifu is believed to be closing in on the $1.5 billion-plus stake in the Wodgina lithium project owned by Mineral Resources. It is understood that indicative bids for the asset are due in two weeks and Ruifu is among several Japanese and Chinese suitors to have expressed an interest.
Based in Shandong province on the eastern seaboard of China, Shandong Ruifu’s interest in the Mineral Resources project comes as no surprise. It is an established supplier of lithium products to the battery industry in China and has previously secured offtake agreements with ASX-listed lithium producers such as Galaxy Resources, Pilbara Minerals and European Lithium. A deal could offer a healthy boost to Mineral Resources, the company made up of three businesses founded by wealthy rich-lister and managing director Chris Ellison. Mineral Resources revealed plans in May to divest a 49 per cent interest in the project as part of an offtake and partnering process, and hired Macquarie Capital as its adviser. It is estimated that the value of the project, 100km south of Port Hedland, is about $3.5bn. It is the largest hard-rock lithium deposit in the world. The reserve supports a mine life of almost 30 years at a production rate of 5.65 million tonnes a year, with extra exploration upside remaining. Mineral Resources is the largest lithium producer in the world by volume and has been acquisitive of late. It recently bowed out of a three-way competition to buy Atlas Iron in a $280m scrip deal, but Mr Ellison is believed to be eager to explore other opportunities. The lithium space remains under pressure for now, with long-term concerns that excess supply could be hitting the market. Mineral Resources’ shares were trading at about $22 at the beginning of the year, but are now worth about $15. Strong interest from offtake partners to invest in lithium projects has meant additional miners are shoring up supply, leading to more projects gaining approval. However, questions remain as to how long it will take for the projects to gain approval or whether they proceed. Meanwhile, shares in the pipeline owner, APA Group, plunged 8 per cent yesterday as federal government leadership instability prompted investors to fear that the $13bn, or $11 a share, cash offer from Hong Kong’s CK Infrastructure would now almost certainly be blocked by the government.
