Lithium rush: Mining titans clash in Australia's 'power corridor'
The vast desert expanse of Western Australia, once renowned for its gold, nickel, and iron ore deposits, has now become the epicenter of a fierce competition among miners vying for control of lithium, a crucial raw material in the global shift towards greener energy.
This year has witnessed a heated struggle for control of lithium resources, with multinational corporations facing off against Australian mining billionaires in two of the state's most remote regions. Dubbed the "lithium corridor of power," a desert area near the mining town of Kalgoorlie in the Goldfields region has become a hotspot for these mining battles. Meanwhile, merger activities in the Pilbara region in the state's northwest have evoked memories of the iron ore and nickel booms of decades past.
Tom Reddicliffe, a mining veteran with four decades of experience and the executive director of GreenTech Metals, noted the rarity of such prolonged periods of high demand for a commodity, describing the current situation as a "frenzy." He likened it to a game of musical chairs, emphasising the urgency among players not to miss out on the opportunities.
The "land grab" for mining rights in the lithium corridor began in September when the US-based Albemarle, the world's largest lithium producer, agreed to acquire Liontown Resources for $4.3 billion. However, this takeover was thwarted by Gina Rinehart, Australia's wealthiest individual, who quietly acquired a 19.9 percent stake in Liontown, forcing Albemarle to abandon its bid.
Rinehart, known for her iron ore empire, continued her interference in the lithium sector by disrupting another takeover, this time involving Chile's SQM and Azure Minerals. SQM had proposed a $1 billion buyout of Azure, but Rinehart acquired an 18 percent blocking stake in Azure, rendering SQM's bid seemingly unsuccessful.
Chris Ellison, who controls the $8 billion mining company Mineral Resources and holds shares in Azure, declared that SQM's bid appeared "dead in the water."
Rinehart and Ellison have become increasingly active investors in various small lithium projects in both regions of Western Australia. Foreign companies, including Albemarle, SQM, and China's Tianqi Lithium, have historically been significant investors in these areas.
Ian Hansen, head of the chemicals division of Wesfarmers, a Perth-based conglomerate that partnered with SQM on lithium assets, expressed confidence in Western Australia's lithium fundamentals. He drew a parallel with the growth of iron ore production in the state's northwest, suggesting that players in the lithium sector seek to consolidate their position by controlling a significant portion of the resources.
Rio Tinto, a global mining giant, has also expressed interest in Western Australia's lithium potential and applied for tenements covering approximately 130,000 hectares in the lithium corridor. Small explorers like St. George Mining have garnered attention as well. While originally focused on finding nickel deposits in the Goldfields region, St. George shifted its focus to lithium when a neighboring company discovered spodumene, a lithium-rich mineral. The company, now renamed Delta Lithium, boasts major shareholders in Ellison and Rinehart.
Recent developments have seen St. George attract investments, despite not yet discovering any spodumene deposits. Companies like Amperex Technology and Shanghai Jayson New Energy Materials have invested significant amounts in the Australian miner, indicating growing interest in early-stage Australian lithium miners.
These developments occur against the backdrop of a sharp decline in lithium prices, dropping by as much as 70 percent compared to last year's highs, amid lowered expectations for electric vehicle demand in key markets like China. However, industry insiders like John Prineas, executive chair of St. George, contend that the investments in their company demonstrate continued strong demand, counter to the narrative of oversupply.
Western Australia already supplies around half of the world's raw lithium and is considered a stable investment destination compared to regions with political instability, such as parts of Africa, and states seeking control over lithium projects, like Chile.
Australia has ambitious plans to enhance its efforts in refining spodumene domestically, retaining more of the value onshore rather than exporting all of its resources to China, which dominates the refining process. Refining spodumene yields higher-value lithium hydroxide, a critical component in EV batteries. Western Australia currently has two refineries, with a third set to open next year through a partnership between SQM and Wesfarmers.
Australia's resources minister, Madeleine King, emphasised the need for more processing of critical minerals like lithium and rare earths, highlighting Australia's ambition to compete with current market dominators. However, the transition into refining has faced delays, cost overruns, technical challenges, and a shortage of skilled workers, slowing Australia's challenge to China's position in the lithium supply chain.
Despite these challenges, mining tycoons and corporations continue to vie for control over Western Australia's lithium-rich regions, eager to capitalise on the global demand for clean energy solutions. As the lithium industry in Western Australia undergoes rapid transformation, players are positioning themselves strategically, with the hope of securing a lasting seat at the table in this burgeoning market.
Peter Milios is a recent graduate from the University of Technology - majoring in Finance and Accounting. Peter is currently working under equity research analyst Di Brookman for Corporate Connect Research.