Wesfarmers powers up after Kidman Resources ticks buyout

Wesfarmers has closed its deal to enter the battery chemicals industry by buying Kidman Resources.

Wesfarmers has closed its deal to enter the battery chemicals industry, after Kidman Resources shareholders gave a tick to the West Australian conglomerate’s $776 million offer for the lithium play at a shareholder meeting in Melbourne on Thursday.

Kidman shareholders voted overwhelmingly in favour of the deal, with 94.7 per cent of shares supporting the $1.90-a-share takeover.

While the scheme of arrangement still needs Federal Court ­approval next week, it clears the way for Wesfarmers to take possession of the company and begin work with its joint venture partner, lithium major SQM, to finalise plans for an integrated mine and lithium hydroxide plant in Western Australia.

Kidman has previously said the transaction should make little difference to the timing of the project, with final feasibility studies due to be signed off before the end of the year and a final investment decision likely early next year.

Depending on the outcome of those studies, Wesfarmers is likely to have to find another $700m to fund its share of the project’s development, with first product likely to hit the market in 2022.

The Kidman takeover closed after a grim few weeks for Australian lithium miners, with Pilbara Minerals yesterday finalising a discounted $36.5m placement to institutional shareholders at 30c a share — a price it has not traded at since early 2016 — as part of a $91.5m raising to tide the company through the sharp downturn in the market.

It will issue another $55m worth of stock to Chinese battery major Contemporary Amperex Technology, and is due to launch a $20m share purchase plan for existing holders shortly.

Last week Alita Resources became the first victim of the lithium market downturn, calling in administrators amid falling prices for concentrate. In recent weeks a host of other producers have announced plans to moderate expansion plans, including Talison Lithium, which runs the rich Greenbushes mine, and the mine’s half-owner, Albemarle.

Wesfarmers’ new partner, SQM, stands almost alone in its desire to move ahead with plans to ramp up production, with chief executive Ricardo Ramos telling analysts on August 22 that the lithium major would push out more product to recapture market share it had lost in recent years.

Kidman shares closed up 0.5c at $1.895, with Wesfarmers up 67c at $39.21 and Pilbara Minerals down 2.5c at 32.5c.