Perth-based Mineral Resources is looking to raise $US750 million ($A1.05 billion) in new debt as it looked to restructure some existing loans and replenish its cash reserves as it pushes ahead with its huge Wodgina lithium processing plant in the Pilbara with US lithium giant, Albermarle.
In November, MinRes struck a $US1.2 billion joint venture deal with Albemarle over the Wodgina project with plans to develop a lithium hydroxide processing plant on site.
MinRes is expected to begin commissioning of the $610 million lithium concentrate (spodumene) plant at Wodgina, south of Port Hedland later this month.
The plant is ultimately expected to produce up to 750,000 tonnes of 6% lithium concentrate a year.
Wodgina is the world’s biggest known hard rock lithium deposit with a 30-year estimated reserve life.
MinRes said in an announcement on Tuesday that it would use the cash to refinance some of its existing credit facilities and for general corporate purposes.
The offer would comprise Senior Unsecured Notes due in 2027 and ratings house, S&P Global Rating has given the debt as B+ rating in line with the MinRes’s overall rating.
“Although MRL is likely to generate materially negative free cash flow over the next few years, due to high near-term capital expenditure, we believe free cash flow could materially increase following completion of the company’s proposed lithium hydroxide plant,” S&P was quoted in yesterday’s statement.
“Our rating incorporates the execution risks associated with MRL’s growth strategy as well as its concentrated asset base and end-market exposure.
“We do not believe that MRL’s external mining services earnings are of sufficient scale or quality to materially diversify these risks.”
However, S&P rated MinRes as having a stable outlook, reflecting its view that the company would appropriately manage its sizeable execution risks with sufficient financial buffer to absorb near-term volatility in lithium prices.
MinRes shares were up 0.7% to $17.08.
The company’s announcement yesterday came three weeks after MinRes revealed that it and Chinese partner, Ganfeng Lithium Co had jointly paid $103.8 million to buy the 13.8% stake in the Mount Marion lithium project in WA’s Goldfields from Neometals Ltd.
The deal means MRL’s subsidiary, Process Minerals International Pty Ltd has now increased its equity interest in Mt Marion from 43.1% to 50%.
The company said the acquisition of the additional Mt Marion equity interest is consistent with MRL’s strategy of identifying value-adding opportunities in the lithium sector.