IGO’s WA lithium challenges as it looks for buyers

IGO and its Chinese partner are struggling to sell lithium hydroxide produced in Western Australia, raising more concerns about the future of a history-making downstream processing plant.

The Tianqi lithium hydroxide plant at Kwinana, south of Perth, is undergoing improvement works.

IGO Limited and its Chinese partner are struggling to sell lithium hydroxide produced in Western Australia, raising more concerns about the future of a history-making downstream processing plant built on the outskirts of Perth.

The trouble-plagued refinery at Kwinana was the first of its kind built outside China but is at risk of being mothballed as the Albanese government promotes it’s Made in Australia policy based on downstream processing of critical minerals in the run up to next year’s federal election.

The refinery is producing more lithium hydroxide than IGO and Shenzhen Stock Exchange-listed Tianqi can sell even though it has never performed to anywhere near expectations.

The refinery woes and a big investment in the Greenbushes lithium mine appear likely to drag the partnership known as Tianqi Lithium Energy Australia into loss-making territory.

IGO, led by Ivan Vella, has no idea when dividends will be back. Picture: Christinne Muschi/Bloomberg

IGO said on Monday that it did not expect TLEA to pay a dividend during fiscal 2025 and could not provide guidance on when dividends might restart.

Ivan Vella-led IGO noted Greenbushes, rated by analysts as the best and lowest cost lithium mine in Australia, continued to generate solid cash flows despite a prolonged downturn in prices for the battery-making ingredient.

The Kwinana refinery was shut down for most of October for maintenance and improvement works that IGO said had led to better performance.

IGO said it might take until March to see the full benefits of the latest remedial and improvement work.

The plant remains in production, even though TLEA has struggled to find buyers for lithium hydroxide in recent months.

“As a result of prevailing market conditions for lithium hydroxide chemical, TLEA has experienced a build in lithium hydroxide inventory at Kwinana over recent months, which is expected to continue in the short to medium term,” IGO told investors.

“TLEA continues to actively market this product to existing and prospective customers.”

The inventory build-up creates another headache for IGO in that lithium hydroxide attracts moisture and begins to “clump” if stored for long periods. This can affect premiums or mean it must be partly reprocessed before sale.

The marketing setback comes as Wesfarmers and its partner SQM commission their own lithium hydroxide refinery at a site almost next door to the TLEA plant.

Wesfarmers and SQM hope to be producing lithium hydroxide by mid-2025.

Tianqi is a big shareholder in Chilean-based SQM, which, separate to its partnership with Wesfarmers, joined forces with Gina Rinehart to acquire WA lithium hopeful Azure Minerals for $1.7bn.

TLEA chief executive Raj Surendran last month urged the Albanese gov­ernment to intervene to secure the future of critical minerals supply chains.

Mr Surendran said the Commonwealth should double down on a $150m WA government rescue package for lithium unveiled after mine closures and hundreds of job losses.

The prolonged downturn has also cast doubt on the future of a lithium hydroxide built at Kemerton in WA by New York-listed Albemarle after the original Tianqi investment at Kwinana.

Albemarle owns 49 per cent of the Greenbushes lithium mine, alongside TLEA with 51 per cent.

Tianqi, which has invested about $3bn in its WA assets, slumped to a $1.1bn loss over the first six months of 2024.

The Kwinana refinery produced 1500 tonnes of lithium hydroxide in the September quarter compared to nameplate capacity for train 1 of 24,000 tonnes a year.

Mr Surendran backed the work done in October to produce a step change in production, but declined to speculate on when nameplate capacity might be achieved.

He also warned that prolonged pain would cause Tianqi and IGO to question their strong support for the refinery.

Originally published as IGO’s WA lithium challenges as it looks for buyers