Wesfarmers forges ahead with lithium expansion despite industry challenges

Company News

by Glenn Dyer

In the face of industry-wide concerns and cutbacks, Wesfarmers (ASX:WES) has demonstrated unwavering confidence in its lithium venture, as evidenced by its recent interim results announcement. Despite cautioning investors that spodumene concentrate sales in 2024 may not bolster earnings due to low prices and high startup costs, the conglomerate remains resolute in its lithium ambitions.

The interim report from Wesfarmers revealed a strategic partnership with Ora Banda Mining to explore lithium ore deposits north of Kalgoorlie over the next three years. This move underscores the company's belief in the future demand for spodumene, particularly with the impending completion of its Kwinana lithium hydroxide refinery.

Directors highlighted significant progress in the commissioning of the Mt Holland concentrator, signaling the company's commitment to its Covalent lithium project. Despite market challenges, Wesfarmers remains optimistic about the project's profitability, citing the high quality of the Mt Holland deposit and its potential for long-term shareholder returns.

Wesfarmers, which owns a 50% stake in the Mount Holland mine and hydroxide refinery in partnership with SQM, expects first-quality spodumene concentrate production to commence in the coming months. The company has secured offtake agreements with top-tier auto and battery customers, indicating strong market interest in its lithium products.

Construction of the Kwinana refinery is progressing steadily, with completion estimated at around 65% as of the reporting period. Total capital expenditure for the project reached $164 million for the half, bringing the cumulative investment since the final investment decision to $892 million.

Additionally, Wesfarmers' subsidiary, WesCEF, has entered into a farm-in agreement with Ora Banda Mining Limited for mineral rights exploration in the Davyhurst area. This further demonstrates Wesfarmers' commitment to expanding its lithium footprint in Western Australia.

While acknowledging the challenges posed by current market conditions, Wesfarmers remains steadfast in its pursuit of becoming a significant player in the global lithium market. With ongoing investments and strategic partnerships, the company is positioning itself for long-term success in the burgeoning lithium industry.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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