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That Mineral Resources boss Chris Ellison does not appreciate being “kicked in the balls” was more detail than investment analysts expected when the company founder pushed back against criticism of a U-turn on lithium strategy away from China towards direct deals with electric vehicle manufacturers.
The four-pronged WA resources company – lithium, iron ore, gas and mining services – last week announced it had “simplified” a joint venture with US lithium giant Albemarle, announced just five months ago, by abandoning many of its key provisions.
Mineral Resources and Albemarle will remain partners in the Wodgina lithium mine.
MinRes operates two lithium mines: Mount Marion in WA’s Goldfields region half-owned by China’s Ganfeng, and Wodgina in the Pilbara, in which Albemarle had a 60 per cent interest.
MinRes also had a 40 per cent stake in a refinery Albemarle is building in Kemerton, in WA’s south-west, to make lithium hydroxide for battery manufacturers out of spodumene concentrate from lithium mines.
The February deal was to increase MinRes’ stake in Wodgina to 50 per cent, cut its interest in Kemerton to 15 per cent, and the Australian company would buy a half-share in two Albemarle lithium hydroxide refineries in China.
The deep integration of the two companies was undone last week, with MinRes to now have no interest in the refineries in WA and China.
After the quarterly results release on Wednesday, Ellison said MinRes’ planned interest in Chinese refineries could be caught up in a diplomatic dispute, as Australia’s coal and barley exports have experienced.
“The risk for Australians in China is high, and we don’t want to trap money in China,” he said.
“They don’t ban the US … they’re much too large.”
However, Ellison said building lithium hydroxide plants in Australia was difficult and expensive.
Instead, he wants to convert the current spodumene product containing about 6 per cent lithium to lithium sulphate with a grade of up to 30 per cent and sell it directly to electric vehicle makers.
“I think the world’s waking up that if you want surety of supply, you’re going to go and spend billions and billions of dollars on assembly lines to build cars – you’ve got to be able to go and have a deal direct with the owners of the rock,” he said.
Until then, Mineral Resources will ship much of its spodumene to China for processing, where it is confident of getting a good deal due to excess refinery capacity.
Ellison is hopeful the federal government, keen for downstream processing to happen here, will provide financial support for local processing.
“We’re famous for being a one-trick pony … we go dig the rock, put it on a ship, then sell it for a few hundred dollars a ton, and then Japan and others send it back to us for about $50,000 a tonne with a Toyota badge on it,” he said.
In an opposite tack to most chief executives who butter up the investment analysts, Ellison sparred frequently during a 90-minute results call about their comments on the revised joint venture with Albemarle.
“I can see that there’s a few out there that don’t really understand the deal,” he said.
Some analysis was “total rubbish” and “simply unfounded, and they’re damaging to our business”, and another was “horseshit.”
Later Ellison, who founded the company three decades ago, was more conciliatory.
“I just don’t like getting kicked in the balls, and I apologise if I’ve been a bit strong,” he said.
Mineral Resources shares closed on Wednesday up 4 per cent at $73.82 a share.
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