Mineral Resources to use Poseidon Nickel processing for lithium, as BHP slows West Musgrave nickel project

Chris Ellison’s Mineral Resources is doubling down on the long-term prospects for lithium with plans to capitalise on the local nickel industry collapse to open a third WA processing hub.

Meanwhile, in another death kneel for the WA nickel sector BHP is shedding contractors at its West Musgrave project nickel and copper project in WA.

MinRes on Monday revealed it had signed a $15 million deal with Poseidon Nickel to buy the Lake Johnston nickel concentrator plant and tenure, about 185km south-west of Kalgoorlie, and convert it into a processing hub.

Last month Mr Ellison said on a media call he would be looking to capitalise on the nickel downtown but refrained from revealing his hand, stating his competitors “always steal my ideas”.

The proposed lithium hub would operate on feed from MinRes’ nearby Mt Marion mine and the Bald Hill lithium project near Kambalda that it bought for $260m last year from the ashes of collapsed owner Alita Resources.

The move also sets up MinRes as a potential processor of feed for a string of listed lithium hopefuls the company brought into during a flurry of market activity late last year, saying third-party ore could be taken “in exchange for project equity”.

Both MinRes and Mr Ellison personally have large holdings in Kali Metals, a junior which has a sizeable landholding in Higginsville near Kalgoorlie, at a nexus between Mt Marion and Bald Hill.

Delta Lithium, which Mr Ellison now chairs following a raid of the junior’s register last year, has two projects in the Goldfields — its flagship and “shovel-ready” Mt Ida operation 100km north of Menzies and the Eureka prospect just north of Kalgoorlie.

Lake Johnston has a flotation circuit with front-end annual capacity of 1.5 million tonnes and is capable of being converted to treat lithium ores, including dense media separation fines.

MinRes will pay Poseidon $1m as part of the binding heads of agreement, $6.5m on completion of the deal and a further $7.5m a year after the acquisition.

Poseidon will also take a 0.75 per cent royalty on lithium minerals and a 1.5 per cent net smelter return royalty on all other minerals and metals extracted from the Lake Johnston tenements.

Mr Ellison said the move was an exciting 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.

Last month Mr Ellison flagged he would soon make an announcement about a lithium flotation plant in the Goldfields.

“The idea of that is all of these little shareholdings ... I’m going to go out to the juniors and we’re going to be able to offer them a tolling service where we take some ownership of their deposit and we toll the dirt,” he said at the time.

Prices of lithium spodumene have regained some lost ground in recent weeks but are still languishing at just over $US1000 a tonne, compared with more than $US7500/t the same time last year, as the uptake of electric vehicles progresses slower than many anticipated.

Shares in Poseidon were down 12.5 per cent in early trade to 7¢ each as investors begin to digest the sale of their flagship asset.

BHP drops more nickel jobs

BHP has shed a chunk of the workforce constructing the $1.7 billion West Musgrave nickel and copper project, which it acquired in the OZ Minerals purchase last year.

West Musgrave is located near the desolate intersection between the South Australian and Northern Territory borders and is about one-quarter complete.

A BHP spokesman confirmed the job losses.

“We continue to assess phasing and capital spend for the ongoing development of the West Musgrave project and have reduced the scope of work with some contractors, who have demobilised from site as a result,” he said.

It is rumoured BHP will reduced its headcount on site from 400 to 300.

Last month, BHP wrote down the entire value of its WA nickel business — and then some — with a $5.4 billion impairment and suggested it could shutter the operations in “the months ahead”.