MinRes is shuttering a lithium mine as pressure builds on disgraced boss Chris Ellison
Santos has rejected claims its boss Kevin Gallagher is a potential replacement for embattled Mineral Resources managing director Chris Ellison.
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Mineral Resources will shut one of its three lithium mines in WA as the dominoes continue to fall across the battery materials sector and amid speculation linking Santos boss Kevin Gallagher to a leadership shake-up.
MinRes will put the Bald Hill mine into care and maintenance amid the rout in the lithium sector, with about 300 workers set to lose their jobs.
Chris Ellison-led MinRes has already shed about 570 jobs across its lithium, iron ore and head office since July 1 and is embroiled in a major crisis over governance standards.
The Bald Hill blow comes with Mr Ellison under pressure to hand over the reins as managing director over his involvement in a tax evasion scandal and other dubious deals involving family members and related parties.
Santos immediately rejected any suggestion Mr Gallagher could be in the frame to replace Mr Ellison.
“Suggestions put today that Kevin Gallagher could join MinRes are completely fabricated, without foundation and false,” Santos chief strategy officer Tracey Winters said.
Mr Gallagher accepted a non-executive director role at MinRes in 2022 in a move seen by some as a potential stepping stone to replacing Mr Ellison. Mr Gallagher eventually backtracked on joining the MinRes board after a backlash from Santos investors.
MST Marquee analyst Saul Kavonic said the governance crisis at MinRes could open the door for Mr Gallagher to step into the top job.
Mr Kavonic said the time might be right for a change for both companies, with Mr Gallagher about to enter his tenth year in charge at Santos and the longest serving chief executive among the big oil and gas players.
MinRes maintains big ambitious in onshore oil and gas, notwithstanding last month’s $1.13bn deal to sell key assets to Gina Rinehart’s Hancock Prospecting.
Under the deal, MinRes sold its prized Lockyer/North Erregulla project and other assets to Hancock but retained a 50 per cent share in some Perth Basin and Carnarvon Basin permits and part ownership of a drilling rig.
Mrs Rinehart has said Hancock plans to supply gas to the market as soon as possible and was looking forward to working alongside “my friend Chris Ellison and his MinRes team”.
MinRes is relying on the strength of its mining services and iron ore operations as the lithium sector takes a pounding with many operations likely to be losing money with prices for 6 per cent spodumene concentrate hovering around $US800 a tonne.
The Perth-headquartered company is facing pressure from joint venture partner Albemarle to wind down production at the Wodgina lithium mine.
MinRes acquired Bald Hill from Singapore-listed Alita Resources for $260m last year amid a spending spree on lithium assets in WA.
Mr Ellison said Bald Hill remained a value asset once the lithium market improved.
“Placing Bald Hill on care and maintenance is a prudent decision, but one not made lightly. The decision aligns with the work we have done across the company in recent months to reduce costs,” he said.
Handing down the MinRes full-year results at the end of August, Mr Ellison vowed none of the company three lithium mines would shut down.
Rio Tinto takeover target Arcadium Lithium moved to transition its Mt Cattlin mine in WA to care and maintenance in September and booked a $US52m impairment on the asset.
Pilbara Minerals boss Dale Henderson warned of carnage among lithium producers after moving to put part of the company’s Pilgangoora operations into care and maintenance.
Mr Henderson said he was surprised more lithium producers hadn’t already fallen by the wayside amid a prolonged slump in prices for the battery ingredient.
Hancock-backed Liontown Resources said this week that it was scaled back the ramp up of its Kathleen Valley mine in response to the low prices.
New York-listed Albemarle predicted lithium prices would remain lower for longer after slumping to a net loss of $US1.11bn for the three months to September 30.
Chamber of Minerals and Energy WA chief executive Rebecca Tomkinson said the case for royalty relief to assist the struggling lithium sector was now clear.
“The Federal and State resources ministers hosted an industry roundtable in Perth all the way back in January, at a time when lithium prices had already fallen 80 per cent,“ she said.
“Since then, we have seen a procession of lithium operations shuttered or placed into care and maintenance in response to the deteriorating market conditions. The time for action is now. If not now, when?“
The WA government has so far resisted pressure for royalty relief.
“The State government continues to engage with the lithium industry to better understand its current challenges,” a spokesman for mines and petroleum minister David Michael said.
WA last rolled out a 12-month, 50 per cent royalty break for the lithium industry in late 2020 after the price plunged below production costs to about $US400 per tonne.
MinRes shares closed down 7.2 per cent on Wednesday to $34.95 each.
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Originally published as MinRes is shuttering a lithium mine as pressure builds on disgraced boss Chris Ellison