IGO boss declares battery chemicals plant a lost cause with hundreds of jobs on the line

Part owner IGO doubts problems with the first lithium hydroxide plant built in Australia - and outside China - can ever be fixed, as it looks to stop the financial bleeding.

The Tianqi lithium hydroxide plant at Kwinana, south of Perth.

The first lithium hydroxide plant built in Australia is on death row, with part owner IGO declaring it has lost confidence in the ability to rectify problems after years of trying to make it run efficiently and at somewhere near capacity.

The plant at Kwinana, south of Perth, was the first of its kind built outside China, and is thought to employ about 350 people.

Its shutdown would come as another blow to the Albanese government’s flagship Made in Australia policy and its hopes of Australia becoming a major player in critical minerals processing.

IGO’s dire warnings come with the likes of Glencore, Rio Tinto and Trafigura-owned Nyrstar Australia seeking bailouts for much older and more established mineral smelters.

IGO boss Ivan Vella all but declared the Kwinana lithium hydroxide plant a lost cause on Wednesday as the company prepared to write down the value of the asset to zero.

“The Kwinana lithium hydroxide refinery operated well below nameplate capacity in the quarter and did not achieve guided production tonnes for the year,” he said.

“Despite the strong commitment from the team at site to address operational problems and ongoing issues, IGO has low confidence in the ability of this asset to achieve meaningful, sustained improvement.

“We continue to work with our joint venture partner to determine the optimal future pathway for the plant.”

The Tianqi lithium hydroxide plant at Kwinana, south of Perth.

IGO owns the plant in partnership with China’s Tianqi, and they also control a 51 per cent stake in the world-leading Greenbushes lithium mine in WA.

New York-listed Albemarle owns the remaining 49 per cent of the Greenbushes mine, and in its own right built a second lithium hydroxide plant in WA also plagued by cost blowouts and underperformance.

Tianqi started building the Kwinana refinery in 2018 in a historic move into downstream processing of lithium outside of China. The Chinese company is a big shareholder in Chilean-based SQM, which has partnered with Wesfarmers to build a separate refinery now in the commissioning phase almost next door in Kwinana.

IGO said it expected a further impairment on its share of the Kwinana refinery of between $70m-90m, resulting in train 1 being fully impaired.

The refinery was hit by equipment failures that affected production in May and another in June.

In that quarter, lithium hydroxide production of 2126 tonnes was 35 per cent of nameplate capacity, an improvement on the March quarter.

The Kwinana plant delivered an underlying earnings loss of $28.7m on top of $19.7m lost in the March quarter. This was despite the plant receiving the benefits of a WA government assistance package for the lithium sector.

Mr Vella signalled on Wednesday that IGO wanted to stop the bleeding and was in talks with Tianqi about the future of the troubled plant.

Shenzhen Stock Exchange-listed Tianqi has invested about $3bn in its WA assets.

IGO acquired its stake in Greenbushes and the refinery for $US1.4bn in 2020 at a time when Tianqi was in financial trouble.

Mr Vella spoke out in support of Tianqi last year when debate raged over whether the Chinese entity should qualify for critical minerals production tax credits due to kick in 2027.

“Tianqi showed enormous commitment and significant capital contribution to start building that first refinery back in 2018,” he said at the time.

“It’s been a very challenging road, and they have not blinked. They have been steadfastly dedicated to making this work in WA, to building the capability in Australia and to solving technical challenges. They’ve made mistakes and had all sorts of challenges.”

Mr Vella hinted at differing views between IGO and Tianqi: it is understood IGO, which along with Glencore is the only nickel producer still standing in Australia, has pushed for the refinery to be mothballed.

Analysts quizzed Mr Vella on his role on the board of joint venture vehicle Tianqi Lithium Energy Australia (TLEA).

He was asked how he could fulfil his director duties properly given TLEA continued to extend shareholder loans to a refinery business that IGO considered to have zero value.

Mr Vella said it was a valid point and an issue for the joint venture partners.

“My focus is almost entirely on making the best of Greenbushes,” he said.

In a statement issued late on Wednesday, TLEA said its management with the assistance of the board and shareholders continued to “work diligently to optimise plant operations, reduce production costs, and improve productivity”.

“While progress has taken longer than anticipated, the trajectory is positive,” the Tianqi-controlled joint venture said.

“Modifications and upgrades undertaken by TLEA over the past six to eight months are delivering results, with production run rates recently achieving 50 per cent and better.”

TLEA said more work was scheduled for 2026 that was expected to improve plant reliability and throughput.

“We extend our sincere thanks to our employees, partners, customers, and state and federal governments for their continued support and belief in the future of Australian lithium refining.”

Originally published as IGO boss declares battery chemicals plant a lost cause with hundreds of jobs on the line