The Mineral Resources Ltd (ASX: MIN) share price is in focus after the ASX mining share announced a sale of some of its lithium business.
Mineral Resources is an ASX mining share involved with iron ore, lithium and mining services.
Lithium sale
Mineral Resources said it has executed a binding agreement with POSCO – one of the large international lithium players. POSCO supplies Korean and Western markets.
The ASX mining share is selling 30% of its operational lithium business in a new joint venture which will hold its existing 50% ownership of the Wodgina and Mt Marion lithium mines.
POSCO will acquire its 30% interest in the joint venture (being an indirect 15% holding of each of Wodgina and Mt Marion at an underlying level) for a total upfront cash consideration of US$765 million, or around $1.2 billion.
The agreed deal values Mineral Resources’ existing 50% interest in Wodgina and Mt Marion at approximately $3.9 billion.
Mineral Resources will retain a 70% interest in the new entity, or 35% at an underlying level.
Who will operate the mine?
Mineral Resources said it will continue as the operator of both mines under existing agreements with its joint venture partners, being Albemarle at Wodgina and Jiangxi Ganfeng at Mt Marion.
The ASX share’s operating entities will remain outside the new joint venture and separate from the transaction.
As part of the investment, POSCO will receive spodumene concentrate (lithium) in proportion to its 30% interest, underpinning its future investment in new downstream processing facilities.
Management comments
The Mineral Resources Chair Malcolm Bundey said:
This first-of-its-kind investment by a major Korean company into Australian lithium is a milestone for our industry. It signals the growing global demand for Tier 1 hard rock lithium assets and the confidence international partners have in Australia’s ability to meet that demand.
By supporting the development of new global conversion capacity, this partnership will play an important role in diversifying the global lithium supply chain and strengthen bilateral ties between Australia and Korea in critical minerals.
This continues our stated commitment to strengthening our financial position and leveraging our core competencies of building world-class assets and recycling capital to position us for the future, while maintaining a material position in global lithium markets with Tier 1 partners.
Final thoughts on the Mineral Resources share price
The company has recovered a long way over the past six months, rising more than 100%.
This seems like a smart move to de-risk its balance sheet even further, while still maintaining its operation of the projects.
I don’t think I’d buy the ASX mining share now after it has already risen so much, but this seems like good news for shareholders.
