MinRes considers lithium mine sales as Ellison exit looms

Debt-ridden Mineral Resources will shop around its lithium mines in WA as it clarifies the future of Chris Ellison, who will leave the company on a timeline that still remains unclear.

New Mineral Resources chairman Malcolm Bundey.

Mineral Resources appears willing to sell its lithium mines to deal with a massive debt pile after slumping to an annual loss of $904m.

And scandal-plagued managing director Chris Ellison will leave, new chairman Mal Bundey said, but he refused to confirm whether the MinRes founder would be gone by the deadline set last year.

The company’s West Australian lithium mines, which are Wodgina, Mt Marion and Bald Hill, are eligible for the chopping block after Mr Bundey revealed the board had reviewed and ranked its portfolio.

“This business has had a long track record in successfully recycling capital and doing it really well,” he said.

Mr Bundey said MinRes assigned its assets to A, B and C categories as it looked for ways to improve the balance sheet and reduce a $5.3bn debt pile. Adding to market conviction around a lithium sale, Mr Bundey said he did not think an equity raising was necessary.

An uptick in prices for the battery-making ingredient will help with buyer interest in any formal process.

“The Bs really fall into a category of assets that are strategic and have been strategic, but for the right price we might consider moving and then the Cs are ones that might have been strategic in the past, but have maybe fallen out of that character, and we’d be looking to recycle them,” the chair said.

MinRes owns Wodgina in partnership with New York-listed Albemarle, and has already reset the joint venture multiple times under Mr Ellison’s leadership. Mt Marion is owned in partnership with China’s Ganfeng, and MinRes also has the Bald Hill mine in mothballs.

Mineral Resources founder Chris Ellison.

Regarding Mr Ellison’s future, Mr Bundey continued to hedge on a departure date.

“My focus is to ensure that Chris’s succession is a robust process and carefully planned,” he said.

“We’ve got to manage key relationships, customers, partners and our people, and preserve the entrepreneurial culture and spirit that we’ve got in here and in the best interests of our shareholders. Once we’ve done these things, we’ll have a better idea on the timing.”

Mr Ellison owns 11.5 per cent of MinRes, which is under investigation by the Australian Securities and Investments Commission and has been through a major board shake-up.

In November last year, Mr Ellison agreed to depart within 12-18 months in the fallout from his involvement in a tax evasion scheme, misuse of company resources and undisclosed related party deals.

MinRes reported underlying EBITDA of $901m, down 15 per cent, on revenue of $4.47bn, also down 15 per cent, on Thursday.

“My focus as chair is on ensuring that Chris’ succession is robust and carefully planned in the best interests of our shareholders and our people. This must be a process, not an event,” Mr Bundey said in a letter to shareholders seeking clarity around succession.

“Chris remains integral to this process, working closely with the board and myself to ensure it is conducted in an orderly, professional manner with Chris’ support.”

In the same letter, Mr Ellison said he was “working closely with your new board to regain trust and deliver the full potential of this great company”.

“Looking back on the last two years, I also acknowledge that we got the lithium price wrong, and our earnings and net debt levels have been greatly impacted,” he said.

“I’ve been in the lithium business for 16 years, but I did not foresee that we’d face prices in the $US500-600/t range again in my lifetime. Our focus of late has been on cost and performance to ensure the business is set up through the cycle, and we’ve made a lot of progress.”

Lithium prices have rebounded and broker UBS predicts they have further to climb on the back of supply disruption in China.

Outside lithium, MinRes has pinned much of its future on the mining services division of the company and the Onslow Iron project touted to eventually export 35 million tonnes a year of iron ore.

Mr Ellison said despite the need for costly haul road repairs and another truck rollover at the weekend, the Onslow Iron project’s ramp-up was progressing well. It is operating at an annualised run-rate of 35 million tonnes as of the four weeks to August 27.

MinRes sold a 49 per cent stake in the 150 kilometre-long haul road that connects the Onslow Iron mines and the local port facilities to Morgan Stanley Infrastructure Partners last year for $1.3bn.

Perth-headquartered MinRes needs to achieve the 35 million tonne run rate for three months before June 30, 2026 to qualify for an additional $200m payment from the Morgan Stanley fund.

Mr Ellison suggested the latest accident on the troubled haul road was the result of driver error. “What happened on this particular incident is that the driver thought that he was nearing a rest bay. He was actually 180 metres from it, and he started pulling the truck over to the left-hand side of the road.”