Market Open Radar: MinRes debuts Delta mission to add Bald $1.3b to war chest

Market Open Radar: MinRes debuts Delta mission to add Bald $1.3b to war chest

October 2, 2023 0 By Amanda Ellis

A court decision has paved the way for Delta Lithium investor Mineral Resources to drop a timely $1.3 billion cornerstone investment into the company bringing with it ambitious plans for its lithium market consolidation and clear runway for it to buy Bald Hill lithium mine from Alita Resources’ liquidator. 

Mining industry veteran Chris Ellison’s plans to consolidate lithium major Mineral Resources’ (ASX:MIN) lithium assets and put Bald Hill lithium dollars in Australian hands have gained momentum this week. 

A Supreme Court decision on Wednesday will allow liquidation of the lithium and tantalum mine’s owner, Singapore-listed Alita Resources (SGX:40F). 

Liquidation of Alita will help clear the way for MinRes to buy its 26.5 million tonne mine in the Eastern Goldfields for a possible price tag of several hundreds of millions of dollars. 

September when: Equity about-face 

Ahead of the decision, MinRes revealed on Tuesday it would capital raise after all, tapping the US bond market for $1.3 billion. 

MinRes’ bond-raise effectively reverses its decision four weeks ago “not … to raise equity”. 

The Australian company will offer US$850 million ($1.3 billion) of senior unsecured notes to qualified institutional buyers in the US. 

Fitch Ratings expected the bonds would fuel growth capital expenditure for about two to three years. 

Shareholders are hopeful the cap-raise will pay for MinRes to acquire assets or construct plants. 

Potential upside: Profits, price, production 

Ellison has acknowledged lithium assets will play a role in helping ensure enough production of the electric car batteries input to ensure a transition to clean energy. 

Earlier this month, Mt Marion lithium mine joint-owner MinRes told the market its proposed acquisition of Bald Hill mine in the Eastern Goldfields carried the promise of local royalties, taxes and profits for the Australian public. 

The Ellison outfit’s purchase price for the hardrock mine is subject to conditions, including an independent mine valuation. 

Fitch has tipped potential upside from MinRes establishing an operational record in commercial lithium-battery-chemicals production, achieving a spodumene concentrate price of about US$2,480 ($1,592) in the financial year 2024 and US$1,040 ($1620) by FY26. 

The markets analyst predicted plenty of upside from an increase in commercial lithium-battery chemicals production from 17,000 tonnes in FY24 to 67,000 tonnes in FY26.  

MinRes has forecast its Mt Marion asset in the Goldfields and Wodgina mine in the Pilbara will produce about 400,000 tonnes of spodumene-shipped guidance (SC6) equivalent in FY24. 

Good pick: Sector consolidation 

Iron ore and lithium player MinRes has multiple asset pick-ups planned, becoming the largest shareholder in lithium development company Delta Lithium (ASX:DLI) in recent times. 

Two weeks ago, MinRes founder and Managing Director Ellison joined the Delta board in a nod to the company’s 17.44 per cent stake in the Western Australian company. 

Delta owns the 13 million tonne Mt Ida spodumene project 100km northwest of Menzies, and the prospective Yinnetharra spodumene exploration project 120km northeast of Gascoyne Junction. 

Ahead of MinRes’s successful Delta mission, outgoing executive chairman, geologist David Flanagan, predicted in May “there’s going to be consolidation in the (lithium) sector”. 

Among other proposed transactions are from MinRes’s Wodgina lithium operation joint venture partner, US giant Albemarle (NYSE: ALB)’s, whose $6.6 billion takeover bid for Liontown Resources (ASX: LTR) has the company’s approval. 

Gina Rinehart’s Hancock Prospecting’s investment Liontown has the undeveloped Buldania lithium project 80km from Bald Hill and the Kathleen Valley underground lithium mine 60 kilometres from Leinster. 

Key issues 

As with any transaction with conditions attached, MinRes’ Bald Hill transaction could potentially fall over amid argy-bargy on price. 

The viability of Bald Hill’s project economics could vary depending on MinRes’ success in lobbying the Australian Government to cancel the mine’s loss-making offtake deal with Hong Kong-registered Yihe Cleantech Material. 

The success of MinRes’ acquisitions and potential lithium industry collaboration efforts could be affected by many factors, including people, asset valuations, plant-building and offtake arrangements. 

Fitch has tipped potential MinRes value-downgrades from any major loss of mining service contracts and net-leveling of earnings-before-interest-tax-depreciation-and-amortisation rising beyond 3x levels over a sustained period. 

Read the previousMarket Open Radar: Whitehaven ready to splash for Bowen Basin coal 

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