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Gina Rinehart, SQM lock up Azure Minerals buy from Chris Ellison, Mineral Resources


Mineral Resources says it will sell its Azure Minerals shares into the $1.7bn takeover bid made by Gina Rinehart and SQM to “recycle cash”, with the company insisting its three WA lithium mines are still profitable despite the lithium price plunge.

MinRes shares surged in a lithium relief rally, as the company joined Pilbara Minerals in saying its mines were still making money despite falling prices.

Shares in the company closed up $3.92, or 7 per cent, to $59.39 on Thursday.

MinRes boss Chris Ellison told analysts on Thursday the company’s existing lithium mines — Mt Marion and Bald Hill in WA’s goldfields district and Wodgina in the Pilbara — could all make money at a price for lithium concentrate of $US600 a tonne, and the company would keep up its strategy of “land banking” by buying into junior lithium explorers.


And Mr Ellison joined Pilbara Minerals in confirming the company would not let up on its lithium expansion plans, as the company looks to drive down average operating costs by lifting supply and growing its share of the raw materials market.


Mineral Resources boss Chris Ellison.


“We’ve got three operating hardrock mines out there and I’ve said publicly I’d like to be able to add a fourth one within two years.

“And we’ll be able to do that through a combination of putting in the fourth plant — and that will be down on the goldfields — and then we’ll be able to go and talk to the some of the junior companies and we’ll be able to hold on to our plant and be able to come up with some sort of an arrangement, whether it be a joint venture or a mine gate sale or something.”

Mr Ellison said all three of the company’s lithium mines were profitable at current prices, shipping a combined 141,000 tonnes of lithium concentrate in the December quarter on a 6 per cent lithium equivalent basis, or about 171,000 tonnes in total.

MinRes said its average production costs at Mt Marion were $844 per dry metric tonne, on a 6 per cent lithium equivalent basis, and the company received an average $US1060 per tonne on the same basis.

Cash costs at the company’s Pilbara operations averaged $875 per tonne for the period.

“We’ve operated in an environment in the MinRes business with lithium where we’ve been sub $US600 sale price for longer than we’ve been above $US1000. So we used to make money at $US600 a ton and we can still do that,” Mr Ellison said.

He said MinRes would continue to buy into other lithium exploration companies as it tried to build up a dominant land position across the Australian lithium sector.

“If you have a look at the history — whether it be with copper or with gold or iron ore — most of the larger companies that were successful were able to accumulate substantial high quality land into their portfolio, and then they could progressively unfold the end row mining operations,” he said.

While MinRes spending on shares in junior lithium explorers has alarmed some analysts over its impact on the company’s balance sheet, those concerns were waved off by chief financial officer Mark Wilson, who told analysts the sale of Azure had a number of options to recycle cash through its business.

Mr Wilson confirmed MinRes would sell its Azure shares, worth about $230m at the $3.70 bid price, to the takeover offer launched by Mrs Rinehart’s Hancock Prospecting and SQM in December.

He also confirmed MinRes was close to finalising the sale of a half-stake in the haul road the company is building to service new mines in the West Pilbara, which would eventually feed through to the company’s port facility at Ashburton.

“The balance sheet is in good shape to support our commitments going forward as we deliver our program for the next six to 12 months,” he said.

While MinRes has plenty of capital spending still to come this year, Mr Ellison said on Thursday it had a number of parties conducting due diligence on the half road share, with buyers likely to collect a tariff for each tonne of iron ore hauled along the private road.

Citi analyst Kate McCutcheon said in a client note on Thursday the haul road could be worth more than $1bn, depending on the size of the tariff and the volume of ore hauled to the port.

MinRes said its iron ore operations also delivered strong shipments into rising iron ore prices in the December quarter, with iron ore shipments up 23 per cent quarter on quarter to 4.8M wet metric tonnes (wmt).

MinRes said its average quarterly realised price was US$119 per dry metric tonne.