Mineral Resources landmark Wodgina deal with Albemarle now worth $1.9bn as terms revised

Mineral Resources has reworked the terms of its now $1.9bn deal with US heavyweight Albemarle.

Mineral Resources chief Chris Ellison. Colin Murty/The Australian

Chris Ellison’s Mineral Resources will fulfil its goal of moving further along the lithium value chain sooner than expected after it renegotiated the terms of its landmark deal with US lithium heavyweight Albemarle Corp.

Albemarle will now take a 60 per cent stake in MinRes’s Wodgina lithium development in the Pilbara — up from the 50 per cent stake it originally agreed to buy late last year — while MinRes (MIN) will pick up a 40 per cent interest in Albemarle’s under-construction lithium hydroxide plant at Kemerton, south of Perth.

The total value of the deal to MinRes has increased from $US1.15 billion ($1.6bn) to $US1.3bn (1.9bn). Albemarle will now pay $US820m for its Wodgina stake and cover MinRes’s $US480m share of construction costs at Kemerton.

MinRes has long harboured ambitions of moving downstream into lithium hydroxide production, which sells at a distinct premium to the lithium concentrate it currently produces.

It had been looking into the development of a lithium hydroxide plant in the Pilbara.

MinRes managing director Chris Ellison said the revised terms represented a win-win for both parties.

“The revised structure preserves the key features of the original transaction while reducing the overall funding requirement for both parties,” he said.

“It also provides an opportunity for MRL to participate in the development of the Kemerton lithium hydroxide plant, which will provide MRL with an interest in an operational lithium hydroxide facility sooner than previously planned through the Wodgina development.”

Albemarle chief executive Luke Kissam said he expected the joint venture would create “great value” for both groups.

“The changes to the transaction accelerate the joint venture’s ability to bring lithium hydroxide to the market to serve the commitments made to Albemarle’s customers through our long term agreements,” Mr Kissam said.

“This also allows Albemarle to reduce its capital spend for the foreseeable future while preserving greater flexibility and options for any such capacity additions in the future.”

The parties have agreed to complete the deal by December, although there are provisions to extend by up to another six months.

There is also a break fee of $US100m payable by Albemarle to MinRes if the transaction is terminated by either party prior to completion.

The revised agreement was welcomed by ratings agency Moody’s.

“We view Mineral Resources’ proposed amendments to its agreement with Albermarle as credit positive, because it gives the company access to the high margin lithium hydroxide market with reduced execution risk and capital commitments associated with moving downstream in lithium,” said Moody’s vice president Saranga Ranasinghe.

Shares in MinRes were up 36c or 2.24 per cent to $16.43 at 2pm (AEST).