Mineral Resources to establish third lithium processing hub with purchase of Lake Johnston plant from Poseidon Nickel

Mineral Resources (ASX: MIN) has shown its confidence in the lithium sector by snapping up a key piece of infrastructure to help consolidate its plans to establish a third processing hub for the battery metal in Western Australia.

The company has signed a binding heads of agreement with Poseidon Nickel (ASX: POS) to acquire the Lake Johnston nickel concentrator plant and tenure 400 kilometres east of Perth, allowing it to process fines from its new Bald Hill and Mt Marion lithium discoveries.

MinRes’ plans to develop Lake Johnston as a lithium processing hub in the southern Goldfields region will also include the processing of third-party ore in exchange for project equity.

Managing director Chris Ellison said this is an opportunity to develop MinRes’ third lithium processing hub in the Goldfields and the first to include flotation capacity to treat fines.

“We intend to bring our expertise in spodumene production to Lake Johnston, which has the potential to service projects throughout the world’s most prospective region for lithium,” he said.

Plant conversion planned

MinRes plans to convert the Lake Johnston nickel concentrator plant to treat lithium ores, including dense media separation fines.

The facility includes a flotation circuit and has front-end capacity of 1.5 million tonnes per annum.

Licensed to operate to 2041, the facility has an active groundwater extraction licence and significant on-site infrastructure such as an airstrip, 200-person camp, electrical infrastructure, workshops and laboratories.

Time and capital savings

Internal studies by MinRes indicated repurposing a brownfields site would reduce the approvals timelines by around two years compared to a greenfields development, in addition to significant capital savings.

Located approximately 185km south-west of Kalgoorlie, the acquired tenure covers 86 sq km with one exploration licence and ten mining leases.

For a payment of $1 million up front, $6.5m on completion of a sale and purchase agreement and $7.5m 12 months after completion, MinRes will own the tenure outright, including all mineral rights.

The transaction is conditional upon the completion of legal due diligence of the sale assets to the reasonable satisfaction of MinRes, the assignment of third-party agreements on terms acceptable to MinRes and the consent of the Minister for Mines and Petroleum being obtained under the Mining Act for the transfer of all the rights and obligations in respect of the tenements.

Win-win for both companies

Poseidon chief executive officer Craig Jones said the $15m proceeds from the sale will provide the company with the funding to execute its exploration-focussed strategy.

“The proposed transaction will crystallise value for shareholders through the monetisation of one of our assets and will enable the company to continue with its strategy to progress the exciting exploration targets identified at Windarra, maintain Black Swan as our near-term production asset and progress new opportunities that are complementary to our portfolio.”