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Kidman Resources shares dropped more than 20 per cent after a Perth court recommended the lithium miner pay more than $100,000 to make up a shortfall on a minimum expenditure for a mining tenement.

Miners typically have to agree to a minimum annual expenditure before a government grants a mining licence or “tenement” on a piece of land.

Kidman argues it should not have to pay the expenditure shortfall for a lithium and gold project called Mount Holland because it then belonged to a previous owner.

But the WA Warden’s Court, which decides such matters, is recommending that the mining minister knocks back Kidman’s (ASX:KDR) application for an exemption.

Mount Holland is a joint venture between Kidman and the world’s biggest lithium producer Chile’s Sociedad Quimica y Minera.

The exemption applications cover 13 of the project’s tenements.

The news saw shares hit an intra-day low of 99.5c before they recovered to around $1.10 – which was still a 14 per cent drop on the last traded share price.

Kidman Resources (ASX:KDR) shares over the past 12 months.
Kidman Resources (ASX:KDR) shares over the past 12 months.

Kidman says the Warden Court’s recommendation is not binding on the mines minister — and the minister has the discretion to grant certificates of exemption to Kidman.

“Kidman disagrees with the Warden’s decision on several grounds,” managing director Martin Donohue said.

“We strongly believe that the Mt Holland project, including the downstream refinery at Kwinana, is a project of not just importance to the State of Western Australia but also nationally as the supply chain for the emerging lithium industry is being established now.”

The warden has determined that the previous owners were short $102,771 on their minimum expenditure requirements, which Kidman says is “not material in the context of the opportunity that the Mount Holland project represents”.

The WA government has been very vocal in its push for the state to become a battery metals hub encompassing everything from mining the raw material right through to downstream processing and manufacturing of the lithium-ion battery components.

But if WA Mines Minister Bill Johnston decides to follow the warden’s recommendation, Kidman has vowed to fight the decision.

The company did however warn that a drawn-out battle will mean delays for the Mount Holland project.

Kidman made history earlier this year when it became the first Australian lithium miner to strike a supply deal with American electric car giant Tesla.

The company is advancing other potential supply deals, which are at an “advanced stage”.

In May, the joint venture partners secured a refinery site at Western Australia’s new Kwinana Strategic Industrial Area.

The Kwinana SIA is a specialist centre for chemical and resource-based processing industries, directly adjacent to the Fremantle Port’s deep-water bulk materials facilities and associated road and rail and networks.

The refinery is expected to be commissioned in 2021, with an initial annual capacity of about 44,000 tonnes of lithium hydroxide or 37,000 tonnes of lithium carbonate.

Stockhead is seeking comment.