MIN

Mineral Resources’ Atlas Mining deal boosts lithium exposure

Mineral Resources’ $280 million takeover of Atlas Iron will deliver the Chris Ellison-led group a royalty over Altura Mining’s Pilgangoora lithium mine, meaning MinRes will now have exposure to all three of the Pilbara’s most advanced lithium projects.
Atlas, which has been battling to keep its head above water in recent years while its iron ore operations struggle along, holds a 5 per cent gross sales royalty over a licence that covers the bulk of Altura’s Pilgangoora lithium resource.
While the royalty could generate MinRes about $5m-$10m a year in royalties, arguably more important is the bargaining chip it gives the company at a time when consolidation in the lithium space is intensifying.
Mr Ellison is widely regarded as one of the mining industry’s shrewdest dealmakers, and has previously used contractual instruments to leverage MinRes into other companies.
MinRes previously inherited largely unknown offtake matching rights over Pilbara Minerals’ own lithium development, also called Pilgangoora, when MinRes bought the old Wodgina project and parlayed those rights into a 7.3 per cent equity position in Pilbara.
Altura recently revealed it had received an indicative and non-binding approach from its major shareholder Shaanxi J&R Optimum Energy Co, and has appointed investment bank Citigroup as its corporate adviser.
Altura managing director James Brown told The Australian his company already had good relationships with MinRes and Pilbara.
“We’ve got an excellent relationship with Pilbara next door,” he said. “It’s no secret we’ve got a co-operative agreement in place with them.
“We’ve both taken the view we don’t want to sterilise any material for no reason so our teams work together.
“MinRes have been very good to us as well, we’ve been able to use their accommodation (near Pilgangoora) and we’ve got a reasonable dialogue going.”
While Mr Brown said the royalty did not carry any other pre-emptive rights or similar clauses, the royalty does mean MinRes will have another chip to play should it ever try to lead a consolidation of the Pilbara lithium industry.
MinRes has plans to develop a downstream lithium processing facility in the Pilbara, and the economics of the project would probably benefit if it could incorporate material from both Altura and Pilbara’s mines as well as MinRes’s own Wodgina lithium mine.
MinRes started mining lithium at Wodgina last year, while Pilbara and Altura are closing in on first production from their neighbouring deposits.