By Peter Milne
Wesfarmers and its Chilean partner SQM are bullish about lithium’s future despite low prices causing current players to curtail growth plans.
SQM chief executive Ricardo Ramos said he expected the battery mineral’s price to be much better by year’s end, and 2025 to be better still.
The Mt Holland lithium mine is 500 kilometres east of Perth.Credit: Covalent
Ramos, speaking at the official opening of the new Mt Holland lithium mine on Thursday, said it was only the first step of its plans in Australia.
“I would like to have 10 different Mt Hollands, one is not enough,” he said.
While SQM is a lithium specialist, Wesfarmers is entering the business just as established players are cutting back.
Wesfarmers chief executive Rob Scott said his conglomerate was always scanning for new opportunities in battery minerals.
Scott said the real challenge was to get projects to market sooner.
Albemarle has delayed committing to build a fourth train at its Kemerton lithium hydroxide plant, and production at WA’s first lithium mine at Greenbushes has been trimmed.
The market may have hit bottom, according to research by Citi released this week, in which its long-term growth outlook for lithium of 20 per cent a year remained intact. However, Citi expected only moderate price improvements this year.
Underlying the long-term optimism was the idea that growth in electric vehicle sales was inevitable. Batteries made up 30 to 40 per cent of an EV’s cost – and all batteries needed lithium.
Ricardo expected late this decade, when other more expensive producers were meeting the increased demand and setting the price, the low-cost Mt Holland operation would be delivering strong returns.
The mine’s output of 380,000 tonnes a year of spodumene will be trucked to Covalent’s lithium hydroxide refinery in Kwinana, south of Perth, when it is completed in late this year. Until then, the raw product will be exported out of Bunbury.
The refinery’s 50,000 tonnes a year of battery-grade lithium hydroxide is enough to make batteries for one million electric vehicles.
Wesfarmers entered the battery minerals sector in 2019 with a $776 million takeover of ASX-listed Kidman Resources, snaring its 50 per cent share of the Mt Holland joint venture with SQM.
Two years later the joint venture, rebadged Covalent Lithium, took a $2.17 billion final investment decision on the mine and refinery in Kwinana.
However, a shortage of labour in WA, engineering issues at the refinery and late delivery of equipment due to COVID caused Wesfarmers to up the cost estimate to between $2.4 billion and $2.6 billion.
Another lithium refinery in Kwinana built by China’s Tianqi, and one further south in Kemerton for US group Albemarle, have also been hit by budget blowouts and delays.
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