MinRes boss Chris Ellison says the company wants to push into fertilisers on the back of gas play
Chris Ellison built a mining services company into a major miner. Now he wants to challenge Australia’s big chemical and fertiliser manufacturers.
Mineral Resources boss Chris Ellison says he plans to use the company’s Perth Basin gas assets to build another leg to the company’s chemicals business, putting urea and ammonia plants on the resources company’s medium-term agenda.
Mr Ellison’s comments came after MinRes joined the takeover rush for onshore gas assets in WA through a $403m all-scrip takeover bid for Norwest Energy.
MinRes has long said it wants to use its growing position in the WA gas industry to power its mines and equipment, but the MinRes boss said on Friday he also plans to move deeper into the Australian manufacturing sector if the gas play pans out.
Norwest is MinRes’ minority joint venture partner in the Lockyer Deep project in the Perth Basin, touted as a potentially major find by Mr Ellison. MinRes already owns 20 per cent of Norwest stock and on Friday the company offered one of its own shares for each 1367 Norwest shares on issue – valuing the company’s stock at 6c a share.
Mr Ellison said the offer was a “Christmas present” to Norwest holders, giving them the opportunity to maintain their exposure to Lockyer Deeps while taking stock in a dividend paying resources major.
And the MinRes boss flagged using the gas from the project to move into downstream manufacturing of fertilisers – urea and ammonia – rather than selling the gas not needed for its own domestic operations into overseas markets.
“I want to create long, long term businesses, so selling gas offshore is a good sugar hit, but I see the real value in building these plants in WA,” he told analysts and shareholders on Friday.
“We think we might be able to get some gas produced around late 2024. But realistically it could run into 2025.”
MinRes already owns a share in Albemarle’s lithium hydroxide plant in the South West of WA, and Mr Ellison has said the company wants to build its own lithium hydroxide plants in the next three to five years.
Adding fertilisers to the company’s plans could turn its chemical business into a fifth leg for MinRes, which already runs one of the state’s biggest mining services companies, mines iron ore and lithium, and is exploring for gas.
MinRes had traditionally relied on partnerships in China for much of its manufacturing, but Mr Ellison said the company had pulled away from the bulk of those partnerships in recent years in favour of building its manufacturing base in WA.
“Why should we go and give away that opportunity and that value in the supply chain, and then run around and just keep digging rock out of the ground? We can do a lot better,” he said.
“Over the last three years I’ve sort of shut down everything that we were doing offshore up in China, our procurement up there and fabricating – we’ve pulled all of that back to WA and we’re making a lot of our stuff here.”
The WA mining industry has struggled with supply chain disruption since the Covid-19 pandemic, with lead times for major equipment items such as trucks and drilling rigs having blown out to as much as two years. Mr Ellison said issues were a major factor in the company’s decision to return its manufacturing base to Australia.
“We’re gonna continue to do that. We’re building more workshops. We’re encouraging manufacturing companies down here – like the big road trains – to open up,” he said.
“The future is here for us in WA, and first and foremost – over and above cost – is shortage of supply. So we need to be able to make sure that we can get the right product within the right time frame so we can keep developing.”
Mr Ellison said Norwest shareholders – which include Gina Rinehart’s Hancock Prospecting, with which MinRes have a number of joint venture partnerships – would be “nuts” not to accept the offer, given the company’s downstream plans.
“It’s Christmas time, so we’re giving the Norwest Energy guys the ultimate present, MinRes shares wrapped in a bow,” Mr Ellison said.
“They’re hard to get, so Merry Christmas, and they need to get in before Santa comes,” he said.
Hancock Prospecting recently won the bidding war for fellow Perth Basin gas play Warrego Energy, after Kerry Stokes’ Beach Energy bowed out of the contest a week ago.
Norwest directors advised shareholders to take no action as the considered the valuation of the surprise MinRes bid.
Norwest shares jumped 31 per cent to 5.9c at close on Friday, with MinRes down 78c to $81.22.
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