The world's largest lithium producer will make a $A150 million investment in Kidman Resources' Mt Holland project near Southern Cross, and plans to build a new refinery in the region.
The world's largest lithium producer will make a $A150 million investment in Kidman Resources' Mt Holland project near Southern Cross, and plans to build a new refinery in the region.
Kidman announced this morning that Chile-based lithium producer Sociedad Quimica y Mineara de Chile (SQM) would spend $US30 million in cash and $US80 million in staged payments to acquire a 50 per cent stake in Mt Holland, with the funds to be used for initial development costs including completion of feasibility studies and construction work on a processing facility.
SQM is also planning to build a separate refinery in the region, which would be used to process product from both Mt Holland and other nearby operations.
Kidman has the option to contribute to the cost of the refinery, which has been estimated at between $400 million and $500 million, to earn up to a 50 per cent stake.
The joint venture represents SQM’s first investment in Australia and the first time a Chilean company has invested in a Western Australian mining project.
The two companies will form a 50:50 joint venture once the staged payments have been made, with Kidman will retain all gold rights at the project.
SQM has agreed to provide a $US21.5 million loan facility to Kidman as an advance on its planned payment contribution to the joint venture.
The agreement is subject to a number of conditions, including “no event or events occurring which will, in SQM’s opinion, have an adverse effect on the ability of the parties to proceed with the transaction or with the development of the project”.
On Friday, the Supreme Court of Western Australia ruled in favour of Kidman retaining lithium rights to Mt Holland after Marindi Metals alleged an agreement for ownership existed between the two companies.
Marindi is yet to lodge an appeal to the court ruling, but Business News was told that the joint venture deal would not be affected if Marindi chose to appeal.
Kidman managing director Martin Donohue said the decision to sign the binding letter agreement with SQM was justified by the Chilean company’s unmatched expertise in the lithium business.
“They are the world’s largest producer, with a depth of technical and marketing expertise that will benefit the joint venture,” Mr Donohue said.
“Their proposal to build an integrated lithium business here in WA with a refinery plant drawing on SQM’s technical capabilities has a lot of merit, for both our shareholders and for the economic development of WA.
“We have also been very pleased with the in-principle support from stakeholders within the WA government, which recognises the potential skills injection into the mining and processing sector from having a company with SQM’s global chemical production credentials building and operating a large-scale industrial plant in the state in JV with Kidman”.
Mt Holland contains the Earl Grey deposit, which contains a mineral resource of 128 million tonnes at 1.44 per cent lithium oxide for 1.84mt of lithium oxide, and a mine life of about 50 years.
Mines and Petroleum Minister Bill Johnston welcomed the joint venture agreement, and the confidence SQM had shown in WA.
“SQM is a world leader in lithium and chemical production, and we look forward to the expertise and skills they will bring to our state,” Mr Johnston said.
Kidman shares were 11.9 per cent lower to 62.5 cents each at 11am.
