Ground Breakers: MinRes boss Chris Ellison says there’s no lithium like Aussie lithium
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Mineral Resources (ASX:MIN) boss Chris Ellison caused a shock when he quickly dumped a $1 billion Chinese lithium processing JV around a month ago.
Now he’s going all-in on Australia’s competitive advantage, not just in producing and shipping the WA spodumene that makes up around half of the lithium raw materials in the global EV lithium market.
Reporting the diversified miner’s full year results, the mining billionaire has confirmed studies are afoot to produce either a carbonate or sulphate with a long shelf life grading 25-30% from its share of the Mt Marion and Wodgina lithium mines for OEMs in the US and Europe.
He said, from an ethical standpoint, Australian lithium was the most sought-after product in the market.
It comes with MinRes, also a significant iron ore, mining services and emerging gas player, aiming to ramp up its SC6 equivalent spodumene output to 1Mtpa and lithium carbonate equivalent tonnes to 125,000tpa.
That will include the potential development of another two trains at the Wodgina JV with Albemarle, taking its processing network to six trains, at a cost of $300-360m on top of $150-180m to develop a planned fourth train at the ~750,000tpa mine.
MinRes saw revenues lift 40% to $4.8 billion in FY23, with underlying EBITDA up 71% to $1.8b, largely on the strength of its lithium business, with higher spodumene prices accounting for a $594m lift in earnings.
Better iron ore prices from higher lump output in the Yilgarn and lower discounts for low grade iron ore also delivered a $328m boost, though profits fell 30% to $244m thanks to a $552m non-cash impairment on the carrying value of its depleting Utah Point and Yilgarn iron ore mines.
MinRes spent $864m in capex last year for the $3b Onslow iron ore hub, a 35Mtpa operation (which could be ramped up to 40-50Mtpa over time) expected to take the company down the cost curve from $99/wmt in the Yilgarn and $71/t at Utah Point to $40/t.
$1.97b is committed for FY24, the bulk of a $2.75b growth, sustaining and exploration spend.
On the financial front MinRes announced a fully franked final divvie of 70c, taking its full year payout to $1.90, well above the $1 paid out in FY22.
Oh yeah, the lithium you all love to scoff.
The expansion to three trains at Wodgina is expected to take off by June 2024.
The longer term targets, Ellison told media this morning, would be a five-year process.
One option to deliver converted lithium chemicals remains through a potential conversion plant in South East Asia.
But Ellison is bullish about the idea of getting as much of his lithium sold out of Australia as possible.
“We’ve got great partnerships with China in iron ore and with Baowu but I think the OEMs are looking to get product direct out of Australia if they can, they’re certainly giving us the signals they’re willing to pay a premium for that,” he said.
“Western Australian lithium is the most sought after product in the world. It’s the most — how would you say — ethical product. (The way) we manage our people, our environment, all those good things that we do.”
Ellison said MinRes has been speaking to most of the big names, though the Western OEMs remain behind the Chinese in building conversion supply chains.
“We’ve had discussions with most of them both in North America and up in Europe … the head of Mercedes Ola spends about 30% of his time thinking about lithium and how he’s going to make sure that he’s got the right supply and continuity,” Ellison said.
“In the same … look we’ve spoken to GM, the guys at Ford. They’re all intently interested in trying to lock away supply.
“We have the advantage of owning a lot of rock in the ground and we’re looking to have those long term partnerships direct with the OEMs.”
Ellison flagged potentially completing one or two offtakes by Christmas, with its sulphate study due for release around the end of September.
After canning the China JV with Albemarle, MinRes has moved to take operational control of Wodgina and converted its 40% stake into a 50% share.
It has given up its 15% ownership of the first two 25,000tpa trains at Albemarle’s lithium hydroxide plant in Kemerton near Bunbury in a rejigging that will also net MinRes a $380-400m payment from the US lithium giant.
MinRes recently completed a major expansion of its other lithium asset, the Mt Marion JV with Ganfeng, while it has also invested in a number of juniors to get its foot in the door on early stage resource, notably backing Develop’s (ASX:DVP) planned takeover of Essential Metals (ASX:ESS) and building a more than 17% stake in Mt Ida and Yinnetharra owner Delta Lithium (ASX:DLI).
MinRes shares lifted an impressive 6% this morning on those results, picking up the rest of the lithium sector in its draft.
Sayona Mining (ASX:SYA), one day on from the departure of CEO and MD Brett Lynch, delivered a sugar hit for the day traders with a 17.58% morning gain.
Also presenting financials today was rare earths beast Lynas (ASX:LYC), which delivered a $310.7m NPAT in FY23, down from $540.8m in FY22 as prices for NdPr and other rare earths products receded in China.
The company’s revenue slid from $920m in FY22 to $739.3m last financial year, with EBITDA down from $601.2m to $377.7m as its costs also lifted from $348.4m to $399.9m.
Meanwhile, a race to beat the deadline set by the end of a licence to import rare earth concentrate to Malaysia has prompted a big lift in capex for a new Kalgoorlie separation plant from $575m to $730m, with as much as $50m of pre-commissioning and commissioning costs also expected to be capitalised.
Lynas boss Amanda Lacaze remains confident in the long term outlook for the rare earths market.
“Lynas remains confident that the rare earths market will continue to grow in value and demand,” she said.
“Our extensive capital investment programme will support capacity growth to meet that demand.
“Our excellent operational performance, and continued focus on operational cost control and efficiency improvements, has ensured that we are well positioned to supply our strategic customers whilst holding inventory to benefit from improved rare earths prices in the future.”
The materials sector rose 1% as lithium and gold stocks rose.