SQM charges ahead with Kidman Earl Grey venture [IMG] A lithium...

SQM charges ahead with Kidman Earl Grey venture

A lithium ion battery rigged up for home use. Picture: Peter Clark.

• PAUL GARVEY
• The Australian
• 12:00AM August 28, 2017
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Lithium heavyweight SQM is aiming to finalise its $US110 million ($138m) joint venture with local play Kidman Resources ahead of schedule as it looks to capitalise on the ongoing surge in lithium demand.

After the release of the company’s latest quarterly earnings, SQM chief executive Patricio de Solminihac told investors the company expected to lock in the deal with Kidman ahead of a September 30 target.

The looming joint venture between SQM and Kidman over the Earl Grey lithium deposit in Western Australia is shaping up as a key part of SQM’s plans to keep up with the growth in demand from the electric vehicle and power storage sectors.

“If you look at the consensus that the industry is given today, we will see growth in the range of 12 per cent to 17 per cent or 18 per cent a year of growth,” Mr de Solminihac said.

“We are talking about a growth in the demand (where) we will need one project additional per year.”

New York-listed SQM is one of four companies that control about 80 per cent of global lithium supply thanks to its lithium brine projects in Chile. The Earl Gray venture marks its first potential foray into hard rock lithium, which typically carries higher operating costs but which can be developed much faster and cheaper than brine projects.

SQM is already planning a doubling of the output from its Chile operations but is also adding Earl Grey and the Cauchari project in Argentina to keep up with demand growth forecasts.

“The potential expansion in Chile to doubling its capacity is not enough,” Mr de Solminihac said.


“So clearly, we need to have more projects for the future. Also, we think that given the size that we have is wise to have production diversification.”

Under the proposed deal, SQM will take a 50 per cent stake in Mount Holland by providing Kidman with a $US30m loan and spending $US80m on project development. The deal was met with a tepid response from investors, and despite a rally in recent weeks Kidman shares are still trading almost 8.5 per cent lower than their pre-deal level.

Earl Grey is one of a string of lithium deposits in Western Australia poised for development as companies look to capitalise on the interest in lithium. Galaxy Minerals has restarted the Mount Cattlin mine, Mineral Resources has developed the Mount Marion and Wodgina mines, and Pilbara Minerals is developing the Pilgangoora lithium deposit.

The world’s biggest source of lithium, the Greenbushes mine in WA’s southwest, is also poised to double its output under plans by its owners Tianqi Lithium and Albemarle.

Mr de Solminihac said he expected lithium demand and pricing to remain strong despite new sources of supply.

“Every time we talk with the people in the industry, we’re seeing that the electrical cars are moving even better than before. We are seeing that in the demand for lithium for carbon materials, in the batteries sold for electrical cars. And also, we see that the other lithium applications continue to be very active,” he said.

“Regarding supply, in the short term, we have not seen that much as that was promised. So these two together make us to see, especially lithium carbonate, better prices for the second half of the year.”