Aiming to cut debt and repair its balance sheet, Australia’s Mineral Resources on Wednesday announced it is all set to sell a 30 per cent stake in part of its lithium business to South Korea’s POSCO, for a whopping $765 million. Following the announcement, the shares of the firm rose to a more than one-year high.
Popularly known as MinRes, the mining services provider is currently battling a debt hole that was caused due to large capital spending on its Onslow Iron haul road project. Also, the collapse of its lithium prices has hit its earnings.
Looking at a broader perspective, for South Korea’s POCSO, this deal with MinRes gives it a platform to enter into Australian lithium mines, especially at a time when the commodity’s price is low. Earlier, POCSO had already made a joint venture lithium hydroxide project in South Korea with Australian lithium miner Pilbara Minerals.
About the Deal
According to the deal with MinRes, POCSO will get an indirect 15 per cent interest in each of MinRes’ Wodgina and Mt Marion lithium mines. Currently, MinRes holds 50 per cent ownership in both projects. Also, POCSO will receive spodumene concentrate in proportion to its 30 per cent interest in the joint venture.
However, MinRes will continue to remain the mines operator under its existing agreements. It hopes the joint venture will help the firm repay external debt and fortify its balance sheet.
Releasing a statement, POSCO CEO In Hwa Chan stated that alongside its steel business, his firm sees energy materials as a core growth driver. Chan added that his firm was committed to a cost-competitive supply of the raw materials.
Impact of the Deal
Just after the announcement of the stake sale to POSCO, MinRes’ shares gained as much as 10.8 per cent in early trading on Wednesday. This is the highest percentage rise since October 11, 2024.
During the August quarter, MinRes posted an annual net loss after tax of A$896 million. It also reported a debt of A$5.3 billion, which was an increase of 21 per cent compared to the previous financial year.
Lithium Price Plunge
Despite the prices of hard rock spodumene, the lithium-bearing mineral, rising from $610 a tonne in mid-June to $880 a tonne in August, they are still way beyond the 2022 peaks above $6,000. This has resulted in Australian miners disposing of their assets to rebuild their balance sheets.
Earlier in August, MinRes had made attempts to sell its stakes in Mt Marion and Wodgina. However, with prospective buyers from India and Japan baulking at the suggested price tag of more than $2 billion, the deal could not take place.
Also, MinRes had made an attempt to put its Ball Hill lithium mine in Western Australia on care and maintenance in November 2024.
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