This week, Australian lithium producer Mineral Resources (MinRes) acquired Poseidon Nickel’s Lake Johnston nickel concentrator, as well as partnered with Lord Resources on the Horse Rocks lithium exploration project. These moves signal MinRes' ability and strategy to seek opportunities in the current lithium and nickel market downturn, and capitalise them for future expansion.
According to MinRes, Nickel’s Lake Johnston is a nickel concentrator plant with a flotation circuit that has front-end capacity of 1.5 million tonnes per annum. It is capable of being converted to treat lithium ores and fines. Therefore, it aims at processing fines from MinRes’ Bald Hill and Mt Marion lithium operations, as well as new discoveries in the region and third-party ore in exchange for project equity, which partly justifies the Horse Rocks lithium project farm-in agreement with Lord Resources announced two days later.
Regarding the Horse Rocks lithium project, MinRes will spend AU$1 million (around US$0.65 million) in exploration to earn 40% stake of the Project, subject to conditions. MinRes also has the option to further increase its stake through Stage 2 and 3 with a joint venture in the future. MinRes has been acquiring stakes from multiple lithium explorers such as Delta Lithium and Global Lithium in the past two years.
Geographically speaking, the soon-to-be-converted nickel concentrator and the lithium project both situate in the Southwest part of Western Australia. The Horse Rocks lithium project sits closely to two operating assets of MinRes, Mt Marion and Bald Hill, and has "same source granite with Mt Marion-Style Li potential", according to Lord Resources.
While the concentrator, though targets at processing feedstocks from Bald Hill and Mt Marion, still has over 100km distance from the mining operations and lacks potential in creating significant synergy with other assets. Nonetheless, the concentrator could still serve as a more efficient brownfield infrastructure for MinRes.
These moves suggest that MinRes is, as always, strategising for future lithium demand boost, and consolidating existing resources around its core assets. As MinRes' CFO Mark Wilson said in the last earnings call, MinRes is "currently sitting with over $4 billion invested in assets under development and yet to generate cash" and these assets are for the long game in the next 20 to 30 years.
Author: Hongqiu Su | Battery Metals Analyst Associate | London Office, Shanghai Metals Market
Email: lilysu@smm.cn
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