The Big Boys Are Positioning For EV-Lithium Market To Turn

By Barry Fitzgerald | More Articles by Barry Fitzgerald

From Wesfarmers to Porsche and Pilbara, the big boys are positioning for EV-lithium market to turn

Spare a thought for Wesfarmers’ boss Robb Scott.

To the surprise of no one, shareholders in Scott’s $776 million lithium takeover target, Kidman Resources, voted overwhelming yesterday to accept the $1.90-a-share bid Scott lobbed back on May 2.

It really was a case of “as well they might”. The ASX lithium sector has been beaten up badly since the bid was announced.

Using the WA spodumene producers as a proxy – the brine producers and developers have performed better – it could be argued that Wesfarmers’ has over-paid by 40%, or some $315m, including the original 47% premium in the bid.

Remarkably, there were 154 Kidman shareholders holding 12.02m shares, or 5.35%, of the shares that were voted who reckoned $1.90 a share was not good enough. Given what has transpired in the lithium market since May 1, they were dreamin’.

Scott has, naturally enough, kept up a brave face, telling analysts at Wesfarmers’ recent profit briefing that the acquisition was about the long term and that “nothing has happened in the market in the last few months that we did not anticipate, so still excited about the opportunity”.

He repeated that the Kidman acquisition was all about parlaying Wesfarmers’ chemical expertise to take a position up the value-added lithium-ion battery supply chain, rather than merely being a spodumene producer.

Given what has transpired since early May, Scott might be wishing he had taken an alternate route and simply secured some offtake agreements in the currently over-supplied spodumene market to feed the chemical ambition.

However, that would have meant flying solo without the security of having Chile’s lithium king SQM on board through its 50:50 partnership with Kidman in the integrated but yet-to-be built Mt Holland project.

All that is, of course, said with a big dose of hindsight. Read more + 

Barry Fitzgerald

About Barry Fitzgerald

Barry Fitzgerald has covered the resources industry for 30 years. His column highlights the issues, opportunities and challenges for small and mid-cap resources stocks - most recently penned his column for The Australian newspaper and before that, The Age.

View more articles by Barry Fitzgerald →