Record profits push Bunnings owner to delve into battery metals beyond lithium

However, they will almost certainly start selling spodumene concentrate as soon as the Mt Holland mine is in production rather than waiting for the hydroxide plant to come online given the sky-high prices spodumene is fetching in global markets.

Wesfarmers chemicals, energy and fertilizers (WesCEF) managing director Ian Hansen, who led the division to record profits of $540 million in 2021-22, said there were two key factors at play in the battery minerals strategy. of the company.

“One is how do we get more involved in this issue of battery minerals and obviously Australia, in particular, is blessed with a number of key components for electric vehicles and batteries in terms of minerals,” he said.

“I think the second component of going further down battery manufacturing is much more challenging in Australia given that there is no…car manufacturing in Australia.

“The more we learn about the battery industry, the more we see that battery manufacturers have very close relationships with individual car manufacturers, the OEMs (original equipment manufacturers) because the batteries really dictate the performance of the car.

“The design of the batteries, the hue of the batteries, both the chemistry and the packaging, reflect the performance of the car, so individual OEMs want to have their battery suppliers very close to them, so they can improve, modify , quickly change the battery design or packaging design to optimize the vehicle design.

“I think the prospect of a battery manufacturing sector in Australia is a bit more challenging than getting involved in more mineral opportunities.”

Hansen said work on the mine and concentrator at Mt Holland, near Southern Cross in WA, was going well, but delivery of some key equipment had been delayed due to closures in Shanghai earlier this year.

Wesfarmers is sticking to its January 2021 capex estimate of $950 million, its half stake along with $950 million from SQM. However, labor shortages, COVID disruption and supply chain issues have eroded the contingency cushion on original costs and Wesfarmers admits that with inflation rising, the figure is likely to end up lower. higher than in 2021 dollars.

Wesfarmers, led by Rob Scott, and its shareholders are already counting the cost of a couple of cold spells in batteries and critical minerals in 2019 and 2020 that followed the company’s exit from thermal coal mining.

Wesfarmers delayed a final investment decision on Mt Holland for a year, after paying $776 million to acquire Kidman Resources and its half stake in the project in 2019 just as the lithium market took a turn for the worse. Lithium prices have soared over the past 18 months with producers reporting record profits for 2021-22 and Wesfarmers 12 months behind where it could have been in terms of first production.

Kidman’s acquisition came shortly after Wesfarmers withdrew a stalled $1.5 billion takeover bid from rare earths producer Lynas that was offering at $2.25 a share. Lynas’ share price closed at $9.03 on Friday after the now $8 billion company reported record earnings and revenue for 2021-22.

Wesfarmers is not looking in the rear view mirror and has beefed up the geology team that came with the Kidman acquisition in the search for new mineral assets and has not ruled anything out, including rare earths, nickel and copper.

“They’re very busy looking at other opportunities in the battery minerals space, particularly in Australia,” Hansen said of the geology team.

Asked if Wesfarmers was considering greenfield projects or project acquisitions as was the case with Kidman, Hansen said he would look at both and that his interest was in a range of minerals needed to decarbonise the economy.

Wesfarmers sees Mt Holland, managed with SQM through the Covalent Lithium joint venture vehicle, as an investment in chemical processing rather than mining given the associated hydroxide plant.

The project is expected to peak in terms of construction labor in the coming months and WA miners are already complaining of severe labor shortages.

There are about 500 workers at Mt Holland, which is the edge of the accommodation town there, and more than 300 working at the hydroxide plant at Kwinana.

Hansen said the numbers at Kwinana could reach 500-600 in the next six months as the overall construction workforce peaked at around 1,000.

Wesfarmers and SQM are already studying options to increase the size of the mine and concentrator, but will likely reject any expansion of the hydroxide plant which is currently scheduled to produce 50,000 tonnes a year.

“There aren’t many of these refineries outside of China,” Hansen said. “We want to see how it works before committing more capital to a refinery.

That is not to say that we suspect there will be problems, but since there are not many in operation, we want to learn from what we have if we are going to design another train.”

One of the few such plants outside of China is located next to Wesfarmers in Kwinana. It was built by Chinese firm Tianqi and is ramping up after producing its first lithium hydroxide in May, but only after lengthy construction and commissioning delays and big cost blowouts.

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