SMS Finance

Albemarle and Mineral Resources’ divorce

The underlying rationale for the divorce between Albemarle, the prominent US lithium giant, and Perth’s Mineral Resources (ASX:MIN) has now become apparent.

A couple of years ago, these two companies appeared to be drawing closer through a series of joint ventures and alliances, involving MinRes’s spodumene operations in Western Australia and its ambitions to ascend the value chain.

However, over time, distance crept into their relationship, culminating in their separation earlier this year. Albemarle indicated its approach by initiating a $2.50 per share cash bid for Liontown, along with the under-development Kathleen Valley mine.

Initially rejected, the bid was ultimately accepted at $3 per share this week, heralding not only the project’s acquisition but also a comprehensive review of Liontown and Kathleen Valley once the bid concludes.

This move firmly propels Albemarle towards becoming the dominant player in the Australian lithium sector, especially with its 100,000-plus ton per year hydroxide refinery at Kemerton in southwestern WA.

On the other hand, Mineral Resources’ current lithium holdings, including 50% of the Wodgina operation and the expanding 50%-owned Mount Marion mine, might soon be joined by the 100%-owned Bald Hill mine in Western Australia.

MinRes intends to acquire the mine if its owner, Alita Resources Limited—facing liquidation since its collapse in 2019—proceeds down that path. The mine, situated southeast of Kambalda in the WA goldfields, was under scrutiny by the Foreign Investment Review Board (FIRB), which blocked a transaction proposed by Austroid Corporation in July 2023.

MinRes explains in its ASX statement that “Austroid, as the secured creditor of Alita, appointed KordaMentha as receivers and managers in December 2020, representing the interests of foreign-owned Austroid rather than Alita’s shareholders.”

The Deed Administrators have commenced legal action in the Supreme Court of Western Australia to place Alita into liquidation, enabling the implementation of MinRes’s acquisition plan.

Should the court appoint a liquidator, MinRes is set to settle the secured debt and secure Alita’s stake in the Bald Hill mine. The transaction’s value depends on several factors, including an independent expert valuation.

MinRes reassures that it plans to fund this venture using its existing cash reserves and resources, without necessitating any equity raising.

Despite the FIRB’s refusal, reports have surfaced suggesting that the Bald Hill lithium mine operates under intricate foreign control structures. The mine’s profitability supposedly suffers due to these arrangements, as profits are transferred overseas via an off-take agreement with Hong Kong-based Yihe Cleantech Material Limited. Allegations have also arisen regarding the underpayment of state royalties, according to MinRes’s ASX statement.

MinRes asserts that a successful acquisition of the Bald Hill mine would ensure its operation by a proficient Australian ASX-listed lithium miner, with profits, taxes, and royalties contributing to the Australian economy.

Nonetheless, MinRes cautions that the outcome of Supreme Court applications remains uncertain, with no guarantees that the transaction will proceed. Additionally, details remain confidential due to the commercial nature of the transaction parties’ agreements.

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