MinRes backs out of Chinese investment deal with Albemarle

Australia’s Mineral Resources (ASX: MIN) has pulled the plug on a billion-dollar deal that would have seen it acquire a stake in downstream assets in China owned by lithium giant Albemarle (NYSE: ALB).

The move doesn’t cancel the miners’ MARBL joint venture, formed in 2018, but modifies for a second time the terms of their agreement, as MinRes attempts to fund and build its own downstream processing plant.

The companies said the fresh amendment simplifies their arrangements, ensuring that each has the flexibility and focus required to deliver value to their shareholders.

They also said the economic effective date for the revised transaction would be April 2022, which is when the parties agreed to speed up the Wodgina mine restart.

In practical terms, it means that Albemarle will now have full ownership of some of the projects held in the JV, including a lithium hydroxide processing plant in Kemerton, Australia and facilities in Qinzhou and Meishan in China.

MinRes will increase its share of the Wodgina lithium asset in Western Australia to 50% and remain the mine operator.

Albemarle will pay MinRes an estimated $380-400 million, including the net consideration for the Australian miner’s share of Kemerton and completion adjustments at Wodgina and Kemerton. 

The updated agreement also means that MinRes will no longer invest in any Chinese conversion assets with Albemarle and will not make any payments to Albemarle for joint downstream investments, the company said on Thursday.

MinRes also recently scrapped a deal with Ganfeng Lithium to convert spodumene concentrate from the Mt Marion mine into lithium battery chemicals.

To extract lithium from spodumene, the most commonly exploited mineral source of the battery metal, it has to go through a process that involves crushing, roasting and acid leaching. The resulting product can then be used to manufacture lithium-ion batteries.

Both companies anticipate closing the amended arrangements later this year, pending regulatory approval in Australia.

MinRes shares rose 5% to A$75.78 ($67.93) apiece in Sydney on Thursday, valuing the company at just over A$14 billion. Its shares traded in a 52-week window of A$46.17 and A$96.97. 

Meanwhile, Albemarle shares were down by over 3% to US$225.64 each ($296.83) in New York on Thursday morning, giving the company a market capitalization of US$26.4 billion. Its shares traded in a 52-week window of US$171.82 to  US$334.55.