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MinRes mulls mega lithium spin-off,JPMorgan digs up structures

Australian miner Mineral Resourcesis considering spinning off and listing its growing lithium arm in the UnitedStates, in a bid to create billions of dollars of value for investors.

StreetTalk can reveal MinRes has investment bank JPMorgan working on the plan, whichcould see it float its lithium mining and processing operations in a separateentity on the New York Stock Exchange

Sources said the board had yet to sign off on the split, howeverit was keen to consider all options in light of a huge difference between thevalue of its shares and specialist lithium companies, such as US-listedAlbemarle.

MinRescould retain a stake in the listed spin-off, ensuring Chris Ellison and hisboard and management get to realise their long-held dream of creating andoperating Australia’s biggest lithium play.

Theconsiderations come only months after MinRes restructured the company into fouroperating pillars - mining services, iron ore, lithium and energy. Eachbusiness unit operates as a separate business, and draws on the group’scentralised services.

The restructure wasdesigned to “better capture the enormous potential that we have built intoMinRes – none more so than in the lithium space,” managing director ChrisEllison told shareholders last month.

The lithium division is widely seen as MinRes’most valuable. It owns direct interests in two lithium mines, Mount Marion andWodgina, and a lithium hydroxide processing plant, Kermerton, all in WA andaccumulated over the past decade.

MinRes is now the largest spodumeneconcentrate producer on the ASX and has produced and sold lithium hydroxide, akey input for making batteries used in electric vehicles, since February thisyear.

Come inspinner

Macquarieanalysts reckon 57 per cent of MinRes’ net present value can be attributed toits lithium arm, while Goldman Sachs has it at nearly 50 per cent.

Brokersexpect it to make more than $2 billion in earnings from the lithium arm in thecoming financial year, increasing to as much as $4 billion by the 2025financial year, potentially making it worth $10 billion or more.

At theheart of the board’s deliberations are whether MinRes could get a deal thatwould put a big valuation on its lithium arm, and instantly create billions ofdollars in value for investors.

MinResshares were trading at 4 times forward EBITDA and 6.4 times forecast earningsper share on Thursday, similar to the multiples on other iron ore miners andmining services companies.

Tocontrast, lithium pin-up Albemarle, which made about $US4.3 billion revenue inthe past year and has operations with Mineral Resources, was at 9.7 timesforecast EBITDA and 12.8 times profit in New York.