Wesfarmers division set to green light Mt Holland mine expansion seeing bright outlook for battery metal

One of Wesfarmers’ oldest support acts is readying to pull the trigger on a $600 million-plus lithium mine expansion as it begins to harvest higher profits from a years-long development blitz.

Wesfarmers’ chemicals, energy and fertilisers division doesn’t get the public attention of the conglomerate’s sexier headliners — retail businesses Bunnings, Kmart and Target.

Its managers have been known to describe it as a quiet achiever.

However, WesCEF has attracted increased attention since it took carriage of Wesfarmers’ billion-dollar bet on lithium through its Covalent Lithium partnership with Chile’s SQM.

The joint venture has so far spent $2.6 billion developing the Mt Holland mine near Southern Cross and building a value-adding lithium hydroxide refinery at WesCEF’s mainstay chemicals complex at Kwinana.

The mine is selling lithium-rich spodumene to Chinese customers, but the expected payday will come next year with the completion of the protracted commissioning of the 50,000-tonnes-a-year plant next year.

But Covalent is now readying to green light an expansion at Mt Holland that will double spodumene production to 760,000 tonnes a year and allow its owners to take better advantage of what they see as a bright outlook for the battery metal, notwithstanding lithium’s price volatility in recent years.

The looming decision comes as the division prepares to harvest higher profits, not just from lithium, but its newly-expanded mainstay CSBP’s sodium cyanide and nitric acid ammonium nitrate operations at Kwinana, which supply mining and industrial customers with a range of products.

It’s easy to forget that CSBP was the foundation of the modern-day Wesfarmers, captured after an audacious, ultimately protracted takeover bid in 1977 by a then agricultural co-operative little-known outside WA.

At the time, Wesfarmers was valued at just $20m. Back then, its $60m bid was Australia’s biggest ever takeover.

WesCEF managing director Aaron Hood says his group, which accounted for just under 10 per cent of Wesfarmers’ group earnings in 2025, is now entering a profit “harvesting” phase.

“There’s been all this effort in the system for the last 24-36 months. The 2027 financial year and beyond is the real unlock of all that embedded profit capacity,” he said.

“When we get the full capacity of the lithium earnings, it’s a material driver for WesCEF but it’s also a very important building block for Wesfarmers.”

Macquarie sees WesCEF reporting a 17 per cent jump in earnings before interest and tax for the 2026 financial year, from $400m to $517m with the first profit from lithium, increasing to $656m in 2028.

Wesfarmers has guided investors to a likely investment go-ahead by the end of the year, but Mr Hood says a decision will likely be announced sooner rather than later.

“I see no reason why it would be at the back end (of the year),” he said.

“We have done the work, engineering is advanced, the approvals pathway is advanced, so we have confidence around the overall schedule.”

While the expansion will draw on existing infrastructure at the mine, reducing the overall cost, Wesfarmers’ bill for the upgrade will still exceed $600m once a new ore sorter is included.

But Mr Hood said that once completed, the expansion would reduce Mt Holland’s production costs, ensuring the lithium delivers for the WA conglomerate over the long term by being better able to withstand price cycles.

“We have now got a very mature operation out at Mt Holland: we’re confident we can run the mine at nameplate (capacity) and get it to a very competitive cost position,” Mr Hood said.

“By making a decision to proceed with the expansion, we are going to move our cost position further to the left, ensuring that through the cycle it will be a competitive and resilient business.

“It has all the hallmarks of a positive investment for Wesfarmers.”

The conglomerate famously has always taken a long-term view, entering the commodity with the $776m purchase of Kidman Resources in 2019 on buoyant forecasts for the take-up of electric vehicles.

But just as it isn’t alarmed by commodity price downturns, it won’t get overly excited when they’re running hot.

Mr Hood said last year’s lows, when lithium tanked after a strong multi-year rally, were “not sustainable” if producers were to keep investing in new supply.

Prices for Australian spodumene have since tripled, aided by unexpected strength in demand for battery energy storage systems.

“Notwithstanding some of the issues with the uptake of EVs by jurisdictions like the US, the uptake in battery energy storage systems has been phenomenal and clearly surpassed Wesfarmers’ expectations,” Mr Hood said.

A lingering sticking point at Kwinana has been Wesfarmers’ frustration with its inability to land long-term supply deals with WA’s domestic gas producers to sustain the energy hungry operations at the complex, particularly given gas shortfalls expected from 2030.

“Not having line of sight on a stable supply of gas across five, 10 or 15 year-horizons makes it very hard to make the investments that businesses like us need to be making,” Mr Hood said.

Like other WA industrial users, WesCEF is frustrated at what it sees as the gas producers’ failure to meet “the intent” of the State’s reservation policy by putting aside 15 per cent of production every year for domestic customers.

“We reckon the original intent and spirit of the original domestic gas reservation policy was pretty clear, that a project should be delivering 15 per cent into the market, and it’s ... easy to see that some projects aren’t doing that,” Mr Hood said.