LG Chemical courted by Mineral Resources last year for $2bn-plus Wodgina deal: sources

Mineral Resources managing director Chris Ellison.

South Korea’s LG Chemical is understood to be among the companies offered the opportunity to buy a stake in the Wodgina lithium operation, which was put on sale late last year by the Chris Ellison-backed Mineral Resources.

DataRoom reported last week that MinRes quietly moved to sell its 50 per cent Wodgina stake as it battled reputational risk, causing its share price to plunge.

Sources say Ellison, who founded MinRes but resigned as managing director this year, had expectations of at least $2bn, an amount parties approached were not prepared to pay. Other suitors courted include Japanese trading houses like Mitsubishi.

MinRes remains adamant it is not raising equity, despite suggestions that the prospect was tested just over a fortnight ago, and says Wodgina is now not for sale. MinRes bonds last week started trading at a discount of about 10c to 15c in the dollar amid a wider sell-off during volatile market conditions.

But its debt, which is mostly owed to bond holders, does not come with covenants.

As of December MinRes had $5bn of net debt. Analysts are concerned about the prospect of a liquidity squeeze, with $2.5bn of current assets versus $2.1bn of liabilities.

MinRes had earlier sold the other half of its Onslow iron ore haul road to Morgan Stanley Infrastructure Partners for $1.3bn last year.

Shares have fallen about 50 per cent after Ellison’s admission he was a tax cheat was followed by an ASIC investigation into the company’s corporate governance and a class action.

The company is vulnerable to a fall in the iron ore price.