November 22, 2018 / 5:40 AM / 20 days ago

UPDATE 1-Albemarle boosts lithium supply with $1.2 bln Australian deal

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By Melanie Burton

MELBOURNE, Nov 22 (Reuters) - Albemarle Corp, the world's top lithium producer, has agreed to pay $1.15 billion to form a lithium joint venture with Australia's Mineral Resources , a week after regulators rejected plans to expand its operations in Chile.

Albemarle will take a 50 percent stake in the venture that will own and operate the Wodgina lithium mine in Western Australia and develop a plant producing lithium hydroxide, the two companies said in separate statements released late Wednesday and Thursday.

The move builds on Albemarle's presence in Australia where it is already a stake holder in the world's biggest hard rock lithium mine, and comes amid an expected boom in demand for lithium in rechargeable batteries that power everything from cell phones to electric vehicles.

Shares in Mineral Resources, which has been looking for a funding partner, surged by as much as a third on the Australian bourse on Thursday, while Albemarle shares finished flat on Wednesday.

The two companies have signed an exclusivity agreement and aimed to reach a binding agreement by Dec. 14, they said.

Albemarle already has a joint venture with China's Tianqi Lithium Corp. to develop the Greenbushes mine and processing plant in Western Australia.

However, its main operations are at the Salar de Atacama salt flat in Chile, where the pace of planned expansions has been slowed by regulatory, environmental and potential technical concerns, broker Canaccord said in a note on Thursday.

"Taxation changes in Chile are also reducing investment appeal in that jurisdiction. A pivot out of Chile is, therefore, not surprising," it said.

Last week, Chilean regulators rejected Albemarle's plans to expand output from Salar de Atacama after its environmental impact statement was found to lack key information.

Regulators have cracked down on water use in the region, which lies at the heart of the world's driest desert.

The Mineral Resources tie-up also flags a move by the global battery supply chain towards Australian producers amid a shift to higher energy-density batteries using lithium hydroxide.

Australia's lithium supply comes from hard rock, which can directly produce hydroxide, while production of hydroxide from Chile's brines is a more expensive, two-stage process.

Wodgina's early stage project exports unrefined hard rock ore. The joint venture plans to build a plant to produce up to 750,000 tonnes a year of 6 percent spodumene concentrate to feed a 50,000 tonne a year lithium hydroxide plant.

Albemarle will need to spend another $300 million to $400 million to develop Wodgina, Morningstar said in a report, rating the deal as "value neutral".

A stage two expansion of the plant could see capacity double, depending on market conditions, the companies said.

Mineral Resources shares closed up 27 percent at A$15.76. (Reporting by Melanie Burton; editing by Richard Pullin)

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