Stronger lithium prices spurs Mineral Resources’ Wodgina mine back into production
Mineral Resources says it will return its Wodgina lithium mine to production amid strong demand for the battery-making material.
Mineral Resources says it will return the Wodgina lithium mine to production amid strong demand for the battery-making material.
MinRes shares closed up $3.53, or 8.9 per cent, to close at $42.91 on the announcement on Monday, as its stock took flight on the suggestion the lithium boom could replace some of the revenue lost through falling iron ore prices over the last few months.
Wodgina is majority owned by global lithium giant Albemarle, which mothballed the operation as lithium prices tumbled in 2019, and only shortly after completing the acquisition of its 60 per cent stake in the mine.
MinRes managing director Chris Ellison said on Monday the joint management committee of the two companies had decided to return Wodgina to production, initially focusing on the start-up of one of its three 250,000 tonne a year processing lines.
“It was the correct decision in late 2019 to place Wodgina on care and maintenance though it never dented our confidence in lithium’s long-term positive demand fundamentals,” he said.
Mr Ellison said construction of Albemarle’s lithium hydroxide plant in the south west of WA – also 40 per cent owned by MinRes – is still not fully complete.
Wodgina is not expected to produce its first lithium concentrate until the third quarter of 2022.
While MinRes did not say where it expected the lithium concentrate produced at Wodgina will be sold, Albemarle has the right to market all of the lithium produced at the mine.
Both companies have previously been clear they are not willing to add to the amount of lithium concentrate in the market, preferring to sell the higher value lithium hydroxide and carbonate produced downstream.
The joint venture’s WA lithium refinery is likely to source its concentrate from the nearby Greenbushes mine in WA’s South West, also jointly owned by Albemarle.
The most likely destination for Wodgina’s output is Albemarle’s rapidly expanding stable of Chinese processing facilities, a key plank in the company’s strategy to maintain its market share in the battery chemicals industry in the face of growing competition.
Albemarle announced in September it would pay $US200m to acquire China’s Guangxi Tianyuan New Energy Materials, currently commissioning a processing plant capable of producing both lithium carbonate and lithium hydroxide.
That deal is not expected to close until early 2022, and Albemarle said on September 30 the plant is likely to enter commercial production in the first half of the year.
MinRes said on Monday a decision on the restart of Wodgina’s other two production trains, which would take its annual output to 750,000 tonnes of concentrate, would depend on market demand.
But Albemarle’s most recent announcement of plans to expand its operations in China may give a clue as to the timing.
Albemarle said on October 22 it had signed agreements to build two more lithium hydroxide plants in China, in Jiangsu and Sichuan.
Each of those plants would produce about 50,000 tonnes of lithium hydroxide, with construction expected to begin in 2022 and be completed within two years.
MinRes’ mining services arm will provide crushing services to Wodgina, and run its camp, and Albemarle will market the output from the joint venture assets.