MinRes will pay just $15m for Poseidon Nickel\u2019s Lake Johnston nickel plant near Norseman, will convert it into a lithium processing hub
\nFollows a year of big spending from Chris Ellison on stakes in lithium juniors and the purchase of the Bald Hill lithium mine
\nTorque Metals boss Cristian Moreno, whose company has identified a deposit adjacent to Bald Hill, says it is a vote of confidence in the future of the metal<\/p>\n
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Like the Old Gray Mare, the price of lithium ain\u2019t what it used to be. But Mineral Resources (ASX:MIN)<\/a> and its towering boss Chris Ellison have shown few signs a splurge on early stage lithium investments in 2023 will abate in 2024.<\/p>\n While prices are low, Ellison is one of a number of billionaires and industry titans looking to the future.<\/p>\n The theory, in Ellison\u2019s own terms, is about control of the rock<\/a>. While prices ebb and flow, resources \u2014 especially high quality ones \u2014 are the hard currency of the electric vehicle supply chain.<\/p>\n Mines always take longer to construct and develop than processing, and it\u2019s important to remember that raw materials run out or become uneconomic. While it may not feel like it now with the industry in a state of lithium oversupply, at some point there won\u2019t be enough lithium to go around for all the refineries maniacally constructed by every Tom, Dick and Harry (or their Mandarin equivalent) in China.<\/p>\n In a nod to the philosophy employed by BHP (ASX:BHP)<\/a>, Rio Tinto (ASX:RIO) <\/a>and later Fortescue (ASX:FMG)<\/a> in their bid to dominate the iron ore game, MinRes is forking out the cash now to gather a position of influence in virtually every fertile corner of the WA lithium game.<\/p>\n Even to the potential detriment of its balance sheet, MinRes spent $840 million last year to build stakes across a number of junior lithium stocks and acquire the Bald Hill mine near Kambalda from administrators of Alita Resources.<\/p>\n \u00a0<\/p>\n Those investments included Delta Lithium (ASX:DLI)<\/a>; now effectively a MinRes puppet state with Ellison on board as non-exec chair, Azure Minerals (ASX:AZS);<\/a> a stake cashed out to recoup some of its outgoings ahead of a takeover by Hancock Prospecting and SQM , Essential Metals; later folded into MinRes backed and Bill Beament run Develop Global (ASX:DVP)<\/a>, and Tabba Tabba discoverer Wildcat Resources (ASX:WC8)<\/a>.<\/p>\n But MinRes, the second largest spodumene producer in the world by volume behind US giant Albemarle, has cast its net wider. Its investments have also included punts on early stage explorer Kali Metals (ASX:KM1)<\/a> and lithium rights at a range of nickel and gold explorers like Pantoro (ASX:PNR)<\/a>, owner of the Norseman gold mine.<\/p>\n Think it was over with lithium prices coming off the boil late last year? Think again.<\/p>\n In early March MinRes returned to action with a JV deal including $5m in immediate cash and up to $15m of expenditure over four years to grab a potential 65% stake in lithium rights over $7m capped Dynamic Metals\u2019 (ASX:DYM) <\/a>Widgiemooltha project (increasing to 80% on a decision to mine). Meanwhile functionary co. Delta offloaded an initial $4.5m to take interests in tenements held by juniors Voltaic Strategic Resources (ASX:VSR)<\/a> and Reach Resources (ASX:RR1)<\/a> around its 25Mt Yinnetharra project in WA\u2019s Gascoyne region. Like father, like son it seems.<\/p>\n \ufeff<\/span><\/span>\u00a0<\/p>\n Ellison plays many cards close to his chest. But he has made no secret of his desire to keep snapping up stakes in juniors and lithium rights from gold companies, noting that many major lithium deposits like Mt Marion and Mt Holland have been found alongside historic gold mines.<\/p>\n Its prime focus is the Goldfields \u2014 in an area from Leinster to Norseman dubbed by former Delta boss David Flanagan the lithium \u2018Corridor of Power\u2019 \u2014 where MinRes just yesterday announced it would acquire the Lake Johnston concentrator west of Norseman from dormant Goldfields nickel play Poseidon Nickel (ASX:POS)<\/a>.<\/p>\n \ufeff<\/span><\/span>\u00a0<\/p>\n The staged $15 million cash deal will deliver a 1.5Mtpa plant with a flotation circuit, essential for MinRes to treat fines from its Mt Marion and Bald Hill mines and giving it capacity to treat third party ore in exchange for equity or toll payments.<\/p>\n Mothballed for a decade, RBC\u2019s Kaan Peker says the plant will likely cost a few hundred million to retool to process lithium up from the modest $31m bill estimated by GR Engineering in 2022 to restart it as a nickel concentrator.<\/p>\n But it will be cheaper than a greenfields build, and come with 2-3 years of savings in the form of State approvals running to 2041. Peker thinks first production will come around 2027-2028, pegging its output at 150,000-200,000t of 6% Li2O spod a year.<\/p>\n Peker noted MinRes has a stretch target of producing 1.5Mt of 6% Li2O spodumene concentrate equivalent by 2028 across its 50% owned Wodgina mine in the Pilbara, Mt Marion JV, Bald Hill and the float plant.<\/p>\n MinRes will also gain a foothold in the Lake Johnston lithium district, acquiring all mineral rights at the 86km2 project. The region saw a surge in interest after the discovery of high grade pegmatites by TG Metals (ASX:TG6)<\/a> at the Burmeister prospect.<\/p>\n Not all explorers in the region are in play. Some have drilled hundreds of thousands of metres without striking a single pegmatite \u2014 the crystal bearing rocks known for containing WA\u2019s spodumene riches \u2014 while others aren\u2019t in a fertile domain.<\/p>\n \u00a0<\/p>\n While the lithium and EV space have been struck by arguably overblown negativity in recent months, Torque Metals (ASX:TOR) <\/a>managing director Cristian Moreno says MinRes\u2019 plant acquisition shows the industry\u2019s majors have a bullish long term outlook.<\/p>\n Moreno\u2019s company owns the New Dawn lithium prospect literally 600m from MinRes\u2019 Bald Hill pit, where it has posted an exploration target of 8-14Mt at 1-1.2% Li2O.<\/p>\n By virtue of its location, the $23 million capped explorer is better placed to feed directly into Bald Hill than the third party plant.<\/p>\n Nonetheless, Moreno sees the acquisition as a major boost for the industry in general.<\/p>\n \u201cWhat they are doing with that lithium hub is consolidate the operations in that region, which means that they are going to be aggressive for additional companies and additional projects,\u201d he told Stockhead<\/em>.<\/p>\n \u201cSo they are going to be aggressive for projects in Norseman, projects in Mount Cattlin, because that area is still fresh no one is exploring over there. This just means that Mineral Resources is going full on \u2014 they believe in lithium.<\/p>\n \u201cThey believe that it\u2019s going to be probably the next iron ore. I agree, lithium is going to be massive.<\/p>\n \u201cAnd these guys they are just super, super bullish and I believe that is the best strategy, it is just absolutely incredible.\u201d<\/p>\n There are big distinctions to be made even between West Australia\u2019s regions when it comes to lithium. Setting the Greenbushes project near Bridgetown aside as an outlier, resources in the Pilbara are typically large in scale but finer grained and higher in impurities like iron which require more material to be floated.<\/p>\n Spodumene deposits in the Goldfields are more diffuse and smaller, with grades of around 1% Li2O common. But, they are coarser and easier to process via dense media separation.<\/p>\n MinRes gets recoveries of around 65% already just with DMS. With the float plant added on, it could capture some of the value left behind in the Mt Marion and Bald Hill tails.<\/p>\n But Moreno said the Goldfields region was \u2018totally underexplored\u2019, and a defined processing pathway could open the door to more exploration for smaller, previously marginal deposits.<\/p>\n He estimates MinRes is producing spodumene at Bald Hill for around US$600\/t, a tidy margin even at today\u2019s spot prices. But yesterday\u2019s news was an indication market leaders see demand on the rise.<\/p>\n \u201cI believe that if you just check all the demand-supply curves for the next two, three or even five years, everything is indicating that the revolution will be the electric battery vehicles, batteries and storage capacity,\u201d Moreno said.<\/p>\n \u201cPut on top of that the solid state lithium batteries, that is going to be amazing. In 2027 Samsung will produce solid state batteries for cars, BMW as well is there.<\/p>\n \u201cIf BMW, Land Rover, all these big brands are going electric, why is the market not reacting about that right? We are we are going to have problems with supply in the coming years.\u201d<\/p>\n \ufeff<\/span><\/span>\u00a0<\/p>\n Just 60km down the road from Chris Ellison\u2019s new plant at Lake Johnson is $12 million capped TG Metals, which has hit grades of up to 3.09% Li2O in drilling at its Burmeister discovery.<\/p>\n News of the find last year saw a host of explorers take a sudden interest in the Lake Johnston region, including mining behemoth Rio Tinto (ASX:RIO)<\/a>.<\/p>\n It looms as an obvious candidate for a MinRes JV or investment, though TG6 CEO David Selfe said the company wants to drill further to uncover the true scale of its Burmeister find and soon to be drilled Jaegermeister prospect before countenancing the thought.<\/p>\n It was among the big beneficiaries of MinRes\u2019 purchase, surging ~16% on the ASX yesterday.<\/p>\n \u201cI think (MinRes is) pretty confident that the lithium market\u2019s coming back in the next 12 to 18 months and I think we are too,\u201d Selfe said.<\/p>\n \u201cI think in terms of the market for us from our highs we\u2019ve been discounted, heavily basically because we are early stage, most of the ones that have held up are closer to development than what we are.<\/p>\n \u201cI think that\u2019ll change as we get further on towards development as well, establishing a resource and then going into our first studies.\u201d<\/p>\n Selfe said TG6 was planning to start met test work early to ascertain whether its ore was suited to DMS, flotation or even simple ore sorting processing, which could determine along with the eventual scale of its discoveries whether it is better to toll treat or go it alone.<\/p>\n \ufeff<\/span><\/span>\u00a0<\/p>\n This was clearly the big one MinRes had worked on for quite some time, but aside from the logical Torque and TG6 moves, where else could it go to find lithium prospective ground around its new processing hub?<\/p>\n When it comes to the ASX there are a few other explorers pottering around the Lake Johnston region.<\/p>\n For a little competitive tension, Charger Metals (ASX:CHR)<\/a> has made some narrow high grade hits at its Medcalf prospect in the Lake Johnston region and is already subject to a farm-in valued at up to $42.5m from Rio Tinto.<\/p>\n That could see Rio earn as much as 75% of the project if it funds $40m of exploration and completes a DFS, but depending on the size of the find MinRes may turn out to be the logical processor.<\/p>\n Bryah Resources (ASX:BYH) <\/a>is also active in the region, boasting the Pegasus project to the immediate north-east of Medcalf and the Round Bottom and Arpeggio prospects immediately east of the Lake Johnston plant.<\/p>\n Further afield, FMG backed Lightning Minerals (ASX:L1M)<\/a>, which floated a couple years ago, kicked off a 7500m aircore program earlier this year at its Dundas project.<\/p>\n That sits 8km east of Liontown\u2019s (ASX:LTR)<\/a> Buldania.<\/p>\n Speaking of that asset it includes the Anna pegmatite, where Liontown previously defined 14.9Mt at 1% Li2O.<\/p>\n Gina Rinehart-backed LTR is worth over $3 billion in its own right and is around three months out from first product at the much larger Kathleen Valley lithium mine near Leinster in the northern Goldfields.<\/p>\n Ellison and Gina have been known to team up in the past, while Anna may well be better suited as a satellite deposit for MinRes than it will be in Liontown\u2019s portfolio given the scale of its Kathleen Valley mine and potential working capital buffer the developer may need in the current market.<\/p>\n Meanwhile, the float plant could be a solution to capture some added value out of Arcadium Lithium\u2019s (ASX:LTM)<\/a> Mt Cattlin.<\/p>\n At current prices the Ravensthorpe mine \u2014 secondary to LTM\u2019s Argentine brine assets \u2014 is set to run out of reserves in the next couple of years with returns on spot unlikely to justify an underground expansion.<\/p>\n MinRes specifically mentioned the former Galaxy Resources owned Mt Cattlin plant on a financial results call last month as one with tailings containing material that could be retreated to extract value from it waste rock. Under the Allkem banner, fines from Mt Cattlin had been sold to Chinese converters at a big discount as unprocessed material.<\/p>\n Also with ground in the Norseman region is Larvotto Resources (ASX:LRV)<\/a>, which shifted focus last year to the Hillgrove gold and antimony project in New South Wales.<\/p>\n \ufeff<\/span><\/span>\u00a0<\/p>\n At Stockhead, we tell it like it is. While Torque Metals and TG6 Metals were Stockhead advertisers at the time of writing, they did not sponsor this article.<\/em><\/p>\n <\/span><\/p>\n The post MinRes remains bullish on lithium, and it could take a host of WA explorers along for the ride<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Continuing to splash the cash<\/h2>\n
The MinRes cash splash<\/h2>\n\n
POS share price chart<\/h2>\n\n
MinRes deal shows its confidence in the lithium story<\/h2>\n
TOR share price chart<\/h2>\n\n
Living next door to Ellis-on<\/h2>\n
TG6 share price chart<\/h2>\n\n
Who else could be on MinRes\u2019 radar?<\/h2>\n
Juniors in the crosshairs<\/h2>\n\n