Mineral Resources eyes lithium consolidation, stake in Azure Minerals

Mineral Resources Ltd. Managing Director Chris Ellison is consolidating lithium ground in Western Australia and is considering taking a stake in Azure Minerals Ltd., whose proposed takeover by Chilean giant Sociedad Química y Minera de Chile SA (SQM) appears to be "dead in the water," the executive said.

Large company-level equity taken by Mineral Resources and Hancock Prospecting Pty Ltd. has foiled takeovers of lithium juniors by bigger players in recent months, and both miners have continued this trend with Azure. Hancock acquired 18.9% of Azure in October, then Mineral Resources increased its holding in the takeover target to 13.56% this month. SQM's takeover scheme of arrangement with Azure is contingent on no other shareholder taking 19%.

After Mineral Resources' Nov. 17 annual general meeting in Perth, Australia, Ellison told media the company is "not acting in concert" with fellow billionaire Gina Rinehart's Hancock with regards to Azure. However, Ellison indicated more merger activity was to come in the next wave of Western Australia's lithium production.

Mineral Resources Managing Director Chris Ellison. Source: Mineral Resources.

"I'm simply happy if I end up with 15% or 20% of the ore body. You've got to be in it to win it. That's a 30-, 40-, 50-year deposit, and everyone would like to have it. I'm not sure how it's going to play out, but I hope it plays out in a way that I'm part of it," Ellison said regarding Azure and its Andover lithium-nickel-copper-cobalt project in the Pilbara.

"If you have a look on the share register, you'll find it's probably about half a dozen organizations that actually own almost all of Azure now, and I'm not sure if any of them are willing sellers. A couple of them are, I'd imagine, but there's probably three or four in there that are buyers. From where I'm sitting it looks like it's dead in the water," Ellison said, referring to SQM's takeover of Azure.

Ellison also expressed interest in acquiring the equity held by West Australian billionaire prospector Mark Creasy, who owns 40% of Andover via Creasy Group Pty. Ltd. and 12.84% of Azure via Yandal Investments Pty. Ltd., which backed Azure's A$120 million raise in August.

Ellison expressed willingness to work with Rinehart on developing Andover, having already established a relationship through their joint development underway on the South West Creek iron ore project and related port development. Mineral Resources has also done mining services work for Hancock's Roy Hill Holdings Pty. Ltd.

"If there's an opportunity to partner with two or three or four groups that all had ownership in an ore body, we'd absolutely be up for that," Ellison said when asked if he would work with Rinehart on developing Andover.

Lithium among gold

Ellison told shareholders at the annual general meeting that while he is interested in potentially getting involved in lithium brine in South America, he is also keen on consolidating ground closer to home in Western Australia's "underexplored" Goldfields region. The area is "known as the most prospective lithium ground in the world, and there's certainly a lot down there to be found," he said.

Gold companies there do not even assay for lithium, but are "fairly keen on dealing with us" knowing that Mineral Resources will be "quick on getting on the ground with exploration, and if there's a deposit out there, we will turn it into a mine fairly quickly," Ellison said.

Mineral Resources will have "wrapped up gathering as much rock as we can" in the Goldfields by mid-2024, Ellison told shareholders, with the intention of "[having] a third mill down there in the next couple of years" with a view to toll-treating ore, similar to what he wants to do in the Pilbara.

"The market finds it really hard to value two commodities inside any company, making it hard to incubate two projects at the same time, so gold companies would certainly look upon [doing such deals] favorably," Brad Valiukas, managing director of Aurumin Ltd., told S&P Global Commodity Insights.

Aurumin in August sold its Karramindie project assets — which are prospective for lithium and near Mineral Resources' Mount Marion lithium operation — to Mineral Resources, which also bought the lithium, nickel, copper and cobalt rights on Pantoro Ltd.'s Norseman gold project in November. Mineral Resources also entered into a lithium partnership for Marquee Resources Ltd.'s West Spargoville project in June 2022.

Mineral Resources has significant equity in Global Lithium Resources Ltd., Delta Lithium Ltd. and Develop Global Ltd., which are all looking to develop lithium projects in the Goldfields.

"The idea is to secure lithium resources for the long haul with tier 2 companies [like Mineral Resources] as well as tier 1 miners in play, and the low pricing helps," Jean-François Bertincourt, founder of benchmarking firm Terra Studio, told Commodity Insights.

SQM and Hancock were contacted, while Azure would not comment.

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