Iron ore miner Fortescue exploring for lithium in WA
Iron ore heavyweight Fortescue Metals Group is looking for lithium in the vast Pilbara region of Western Australia, in response to the strengthening outlook for lithium and electric vehicles worldwide.
Fortescue's chief executive, Nev Power, confirmed the exploratory work on Tuesday, saying the tenements it held were "next door" to the current lithium operations of Pilbara Minerals and Mineral Resource.
"So we're in the right area. We're looking for elephants in elephant country, but whether you find the elephant, I don't know," he said.
Asked if Fortescue's interest in lithium was driven by the strengthening outlook for lithium and electric vehicles, he said: "Yeah, absolutely."
Mr Power, who will depart Fortescue in February 2018 after six-and-a-half years at the helm, was speaking to media at the International Mining and Resources Conference in Melbourne on Tuesday.
Meanwhile, the managing director of Australian lithium company Kidman Resources, Martin Donohue, told the conference that Chinese companies had been striking deals with lithium companies to secure lithium supply.
"It's very hard to find a lithium developer or producer that hasn't signed some kind of an off-take with the Chinese converters, or even further upstream," he said.
"What's that meant, in some ways it's almost like an arm's race as we get into this electric vehicle market," he said.
"The European and the American auto companies have been caught slightly flat-footed by the Chinese, and they've really at the moment, effectively got one place to go to try and secure off-take, and that's us, at Kidman," he said.
In an interview with Fairfax Media, Mr Donohue said he was not surprised that Fortescue was looking for lithium.
Fortescue chief executive Nev Power says the miner is looking for lithium in the vast Pilbara region of Western Australia. Photo: Matt Reed
"I think everyone has realised that this is a once in a generational shift in the natural resources that are going to underpin what happens in this electric vehicle market. If companies as big as Fortescue are looking, it just validates the macro outlook on what we see," he said.
Kidman, which has a market capitalisation of about $425 million, has one of the biggest lithium projects in the world at Mount Holland, about 500 kilometres east of Perth.
So we're in the right area. We're looking for elephants in elephant country, but whether you find the elephant, I don't know.
Nev Power, Fortescue chief executive
Fortescue's Mr Power said his company's interest in lithium was "not about jumping on the bandwagon".
Fortescue was a large business with very strong iron ore operations, and it would only develop lithium projects if they measured up.
"We have tenements that are highly prospective for lithium in the Pilbara. We are exploring those (with) drilling programs there. We also like copper, because as economies develop, copper is one of those ubiquitous metals that is needed in developing economies, and the more electrical wires you put in houses and cars and aeroplanes and whatever it is, then that's going to increase the demand for copper.
"And globally, copper grades are falling, so there is less supply of copper than the demand projection.
Fortescue would assess potential lithium projects using the same approach as with other commodities.
"So where would we be on the cost curve, what can we bring to that industry to bring innovation in development and operations. Because the key for us is about the value that we can create, rather than get guessing the timing of a cycle because that's very very hard to do," he said.
"We're not in the business of just trying to pick a cycle, but rather say 'can we develop deposits which are low cost, high efficiency,' so we're there for the long term," he said.
Fortescue's interest in lithium comes as worldwide demand for electric vehicles continues to grow, and countries signal tougher rules on the use of petrol and diesel vehicles.
The lithium sector has also been a favourite for investors this year, with lithium company Galaxy Resources, more than doubling in price since the middle of June. It closed on Tuesday at $3.43. Kidman was trading as low as 35 cents in April this year; it closed on Tuesday at $1.215.
The International Mining and Resources Conference is on this week until Thursday, at the Melbourne Convention and Exhibition Centre.
