MinRes under pressure from partner to wind down Pilbara lithium mine
MinRes’ partner, New York-list Albemarle, says lithium prices will stay ‘lower for longer’ which is likely to increase pressure for a wind-back of operations at the Wodgina mine in WA.
Mineral Resources is under pressure from joint venture partner Albemarle to wind down production at the Wodgina lithium operations as it grapples with the scandal around managing director Chris Ellison.
New York-list Albemarle said it believed lithium prices would stay “lower for longer” as it unveiled plans to cut its global workforce by up to 7 per cent and a new round of cost cutting aimed at saving up to $US400m ($600m) a year – on top of a huge reduction in capital expenditure.
Albemarle boss Kent Masters indicated he was leaning toward putting one of the two processing plants at the Wodgina mine, in WA’s Pilbara, into care and maintenance but he needed MinRes to agree.
“We’re deciding about the number of (production) trains that we operate at Wodgina,” he told analysts after Albemarle slumped to a net loss of $US1.11bn for the three months to September 30.
“That’s something we have to agree with our joint venture partner.”
Mr Masters rejected speculation Albemarle could seek to sell its 49 per cent stake in the Greenbushes mine in WA that is regarded as the world’s premier hard rock lithium mines. Chinese company Tianqi and ASX-listed IGO Limited own 51 per cent.
“Greenbushes is not something that we are thinking about selling,” Mr Masters said, while acknowledging other assets – including its catalyst-focused Ketjen business – might be up for grabs.
Mr Ellison recently vowed to keep the three MinRes lithium mines in WA – Wodgina, Mt Marion and Bald Hill – operating while cutting spending to a minimum. The company, under siege over its governance standards, has shed 570 jobs since July 1 across its head office, iron ore and lithium operations.
Industry super fund giant HESTA is pushing for Mr Ellison to exit the company sooner rather than later in the wake of his involvement in a tax-evasion scandal, and he has tested Albemarle’s patience in the past after backing out of an agreement to co-invest in downstream processing in China.
HESTA wants tougher action from the MinRes board before the company’s annual general meeting on November 21 as pressure builds on Mr Ellison over the tax dodge and deals that resulted in MinRes funds flow to related parties, including his daughter.
Although major shareholder L1 Capital wants Mr Ellison to stay, others are heaping pressure on the board to ditch a 12-18 month succession plan unveiled on Monday.
HESTA owns about 0.75 per cent of MinRes stock, a stake valued at about $55m. The Future Fund, which has a $88m stake, and AustralianSuper are among other shareholders who have raised concerns.
HESTA chief executive Debby Blakey said on Friday that the fund had been in talks with MinRes about its governance failures and remained disappointed with the company’s response.
“Our concerns include that the managing director’s succession time frame does not reflect the seriousness of the issues and that the issues identified indicate a systemic failure of governance at the senior management and board level,” she said.
“We believe the MinRes board has a critical opportunity ahead of the company’s upcoming AGM to provide investors with confidence they are taking appropriate action to address these governance failures.”
HESTA has placed MinRes on its watchlist alongside oil and gas producers Woodside, and Santos.
The move opens the door to HESTA taking action which could include divesting the stock, voting against director re-elections, as well as supporting or filing shareholder resolutions in an attempt to force change.
MinRes and Albemarle put plans for a third processing train at Wodgina on hold earlier this year as lithium prices tanked.
Albemarle said it now expected prices to stay around $US12,000-$US15,000 a tonne for lithium carbonate equivalent for the foreseeable future and was positioning itself to compete at that level.
MinRes previously re-cut its joint venture with Albemarle to exit involvement in a lithium hydroxide plant at Kemerton in WA built to process spodumene mined from Greenbushes.
Albemarle’s September quarter result included a $US861m asset write-off on Kemerton after putting one of two 25,000-tonne-a-year processing trains into care and maintenance and shelving plans for a third production train. It shed about 300 jobs in WA as part of cost-cutting measures.
Charlotte-headquartered Albemarle is now looking to slash capital expenditure by at least $US800m in 2025 as it braces for a prolonged lithium winter.
It has warned dividends from the Greenbushes joint venture will be lower than normal this year and into 2025 as expansion work is completed.
Asked about the supply outlook, Albemarle energy storage president Eric Norris noted one of China’s largest lepidolite producers had gone into care and maintenance and pointed to the pain among WA-based miners that has seen Rio Tinto takeover target Arcadium move to halt production at its Mt Cattlin mine and Pilbara Minerals suspend one of its processing plants.
“As to why more (supply) has not come out, it is a little puzzling. It is a market with significant Chinese presence today, and it’s a market where you have a lot of young companies whose sole reason for existing is to raise a lithium project,” Mr Norris said.
“They may have cash on their balance sheets and as long as they can continue to operate, they will do so. They don’t have an alternative.”
