Wesfarmers flags cost blowout at Mt Holland lithium plant in WA
Wesfarmers’ lithium project has become the latest major WA mining and processing facility to disclose a substantial cost blowout.
Wesfarmers’ lithium project has become the latest major WA mining and processing facility to disclose a substantial cost blowout, with the conglomerate also pushing back its completion date by six months.
Wesfarmers is building the Mt Holland mine and associated lithium hydroxide refinery with Chilean chemicals major SQM.
In 2021 its construction budget was $1.9bn. The company said on Wednesday it now expected the integrated mine and refinery to cost about $2.6bn – excluding capitalised interest on borrowings.
Accounting for inflation, the real size of the budget blowout was only 10 per cent to 20 per cent, the company said.
Wesfarmers said it also expected a six-month delay in completion for the lithium hydroxide plant, with first output now expected in the first half of 2025.
“Delays in refinery engineering combined with labour availability and pressure as a result of Covid-related restrictions affecting key capital items sourced from offshore have impacted cost and timing expectations for the completion of the Kwinana refinery,” Wesfarmers said on Wednesday.
But the company said it expected some of the costs blowout to be offset by early lithium concentrate sales from the Mt Holland mine, with the company saying it expects to booking revenue from sales by the first half of 2024.
Wesfarmers chief executive Rob Scott said the first ore had been mined at Mt Holland in December, with the concentrator now 70 per cent complete.
Wesfarmers follows fellow WA lithium hopeful Liontown in flagging major blowouts at a new project, with Liontown saying in late January it expected a 65 per cent lift in the final cost of its Kathleen Valley lithium mine – only seven months after the final investment decision on the project was made.
Kathleen Valley is now tipped to cost $895m, including a $40m contingency, up from a $545m estimate from June 2022.
Like Wesfarmers, Liontown managing director Tony Ottaviano blamed higher labour rates across its construction contracts, along with the West Australian skills shortage that has reduced construction productivity.
Wesfarmers shares closed up 65c to $49.35 on Wednesday.
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