Red-dirt billionaires in race for ‘white gold’

Gina Rinehart might be known as a climate sceptic, but Australia’s richest person knows when there is “green” dollars to be made from digging things out of the ground.

She is just one of the West Australian mining billionaires who are in a mad scramble for the state’s vast deposits of lithium – the metal dubbed “white gold” due to its market value and silver colour.

WA billionaires Tim Goyde, Gina Rinehart and Chris Ellison.Credit:

Its value lies not in its scarcity, but in the booming demand for the lightest of metals.

It is essential for powering the batteries, which are the driving force behind the global electric vehicle wave. Batteries are also the most expensive component of these cars.

Prime Minister Anthony Albanese underlined lithium’s importance this week when he announced plans to double the finance available to local exporters of lithium, nickel and other essential elements for batteries and other renewable technologies from $2 billion to $4 billion.

The extra funding for miners and processors should help unlock Australia’s vast reserves of these crucial elements.

“My government is committed to transforming Australia into a renewable energy superpower and harnessing the critical minerals we have at home is crucial to achieving this,” Albanese said in Washington.

Pilbara Minerals’ lithium mine in Western Australia produces spodumene – a crystalline powder that is about six per cent lithium. Credit: NYT

The Department of Industry, Science and Resources reported that Australia’s lithium shipments were worth $20 billion in the 12 months to June, and had earlier forecast that the sector’s earnings could rival that of thermal coal exports by 2028. To give some context, thermal coal exports hit $66 billion last year, while iron ore exports topped the tables at $124 billion.

Most of the supply is coming from Western Australia, which provides half the global output of lithium.

Lithium began to gain serious attention between 2014 and 2018, when an army of rusted-on retail shareholders piled into the sector, motivated by the material’s importance to the electric vehicle revolution which was starting to take shape just six years after Tesla unveiled its first car.

Interest in the mineral really took off in 2021 after President Joe Biden gained power in the United States on the promise of rolling out an ambitious carbon reduction agenda.

But local investors had already made a killing. Vulcan Energy had risen from a low of 23¢ in 2020 to as high as $9.95 in January 2021, making it the best performing ASX stock despite being years away from commercial production.

Galaxy Resources, which later merged with Orocobre to former global giant Allkem, rose more than 500 per cent over the same period. Pilbara Minerals rose more than 600 per cent.

Gina Rinehart’s Liontown raid thwarted a multibillion-dollar takeover by US group Albemarle. Credit: Trevor Collens

It underlines why some of Australia’s richest people are trying to build controlling stakes in lithium miners, big and small, despite the price of lithium plunging this year on fears that a production surge in places such as China and Australia could lead to a glut.

Rinehart is now the largest shareholder in lithium developer Liontown Resources, after a month of raids on the miner’s stock. Her 19.9 per cent holding – just short of the threshold that would require her to launch a takeover – helped defeat a $6.6 billion bid from US chemical giant Albemarle.

Liontown is close to finishing development of a lucrative high-quality hard-rock lithium deposit in Kathleen Valley, which was the source of Albemarle’s interest.

It sits along what mining veteran David Flanagan has dubbed the “lithium corridor of power” – the stretch of lithium-rich soil where West Australian billionaires clash with global giants for control of this crucial ingredient for decarbonisation.

Falling prices have not deterred Chris Ellison from moving to secure the Bald Hill lithium mine from receivers.

Flanagan, until recently the chairman of Delta and its soon-to-be-ready Mt Ida project – south of Liontown’s Kathleen Valley deposit – departed after another local mining billionaire, Chris Ellison, snatched up a 17 per cent stake in Delta and effectively took control.

Ellison has installed himself as non-executive chairman at Delta with his lithium head, Josh Thurlow, also joining the board.

Delta’s site in WA’s goldfields region north of Kalgoorlie is close to another patch of dirt being explored by mining junior Juno, which lists Hancock as its biggest shareholder.

It’s not Rinehart’s only lithium play. Around the time she first raided Liontown’s register, she also took a cornerstone stake in junior lithium explorer Future Battery Minerals.

Rinehart’s Hancock Prospecting also has a substantial stake in lithium explorer Vulcan Energy. But after outlaying close to $1 billion through Hancock Prospecting on Liontown, it’s definitely her largest investment so far.

Hancock’s share of the miner is now bigger than company chair Tim Goyder’s and signalled lithium’s coming of age as a sector to be taken seriously.

Goyder, the cousin of Qantas chairman Richard Goyder, became a billionaire himself on the back of his successful bet on lithium’s future – via Liontown – when it was on the speculative prospecting fringe of the mining industry.

Tim Goyder became a billionaire on the back of his successful bet on lithium’s future.Credit: Trevor Collens

Ellison has also been busy. He sits on 9.6 per cent stake in another WA explorer, Global Lithium, and is involved in a complicated dance for control of Essential Metals along with its Pioneer Dome lithium project near Kalgoorlie.

The $11 billion MinRes is already riding the lithium boom thanks to its two large operating lithium mines.

It co-owns Mt Marion, also in WA’s goldfields region and within the “corridor of power”, with one of the world’s largest lithium producers, China’s Jiangxi Ganfeng Lithium Co. It also has a 40 per cent stake in the Wodgina lithium mine in WA’s north along with Albemarle.

But not everyone is joining the lithium party. BHP boss Mike Henry has remained cautious, telling investors recently it would only invest in sectors with the scale and margins to guarantee significant returns.

Rio Tinto, by comparison, remains supportive and has pegged out exploration sites in the “lithium corridor of power” – not far from Liontown’s Kathleen Valley project.

In a market update this month, it signalled that the 50 per cent drop in lithium prices had not dimmed its long-term view of the sector.

Strategy? We kind of make it up as we go along

Mining billionaire Chris Ellison

“Longer term, market fundamentals for lithium remain strong as EV [electric vehicle] adoption continues to rise on supportive government policies and supply shortfalls requiring further investment,” it said.

MinRes declined to comment about its lithium plays, but when Ellison was asked at a full-year financial briefing in August if there was an overarching strategy, he quipped: “Strategy? We kind of make it up as we go along.”

Rinehart, too, is tight-lipped about her lithium adventure, apart from brief statements that accompany each new batch of shares she buys. In them, Hancock has hinted at taking a board seat on Liontown and has urged the miner to use Hancock’s “demonstrated project development and operations ramp-up capability”.

The frenzy of deals is playing out as some analysts continue to question the demand outlook for lithium amid rising production levels.

Lithium prices have more than halved this year amid worries of softening demand and worries about demand in the largest EV market – China – which has been roiled by a consumer funk.

Pilbara Minerals highlighted the change in fortunes on Thursday, reporting that lithium prices were down 47 per cent compared with the prior September quarter, which sent its revenue down 43 per cent to $493 million.

It dropped plans for a special dividend noting that, “market conditions have softened in a period where the group is undertaking major capital investment programs”.

Lithium’s price weakness is said to have played a role in the merger and acquisition boom that drew global giants such as Albemarle to the bargain assets on offer in Australia after three years of booming prices.

Albemarle’s exit from a Liontown deal is not expected to temper the feverish M&A activity.

“We’re going to see another wave of consolidation,” Regal Funds chief investment officer Phil King told Bloomberg this week.

“We’re focused on those companies that, we think, are targets.”

The fund manager owns shares of Pilbara Minerals and Lithium Power International. The latter agreed to a takeover this month by the world’s largest copper producer, Chile’s state-owned Codelco.

Another of King’s investments, lithium explorer Azure Minerals, announced a deal on Thursday to be acquired by Chilean lithium giant Sociedad Quimica y Minera (SQM) for $1.6 billion or $3.50 a share, which sent its shares soaring more than 40 per cent. The stock is up more than 1000 per cent this year.

Within hours of the announcement there was speculation that Rinehart was the mystery buyer acquiring Azure shares.

Morningstar analyst Seth Goldstein is one of the market experts predicting that good fortune will continue to shine on these red-dirt billionaires, and other investors, with a forecast that production will continue to fall short of demand and underpin prices.

“While we see rising supply, we think enough projects will face delays to keep a market deficit as demand grows,” he says.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.