Mineral Resources calls time on loss-making Chinese lithium venture

A London subsidiary of Mineral Resources has written off more than $60 million after shutting a Chinese lithium marketing operation that ran for less than two years and employed five people. MinRes funded the Chinese operation, named LithCo Lithium Ningbo, through a UK registered company called Lithium Resources UK. Documents lodged with the UK’s business registry this month revealed $64.3 million had been funnelled from MinRes, into the UK subsidiary and then to Ningbo via an intercompany loan. Untangling the complex financial web to close Ningbo left behind a $60.7m impairment for Lithium Resources UK that a MinRes spokesman said “has no impact on the accounts at the MinRes group level, as the impairment will eliminate on consolidation”. Ningbo sold spodumene from the Wodgina lithium mine in WA’s north that MinRes operates and owns evenly with the US-headquartered Albemarle. But questions linger over who Ningbo was selling spodumene concentrate to and what specifically triggered a $60.7m writedown to cease an operation constituting only five employees with a modest office and warehouse in Zhejiang, China. Ningbo opened two years ago, roughly when MinRes and then joint venture partner Albemarle rejigged their lithium processing arrangement, or MARBL joint venture. At the time the lithium market was abuzz with the promise of an imminent tidal wave of electric vehicle-derived battery demand, generating huge momentum among mining companies to join the rush, make investments, and get new operations running. Prices since then have fallen markedly. As part of its revised arrangement in July 2023, MinRes said it would no longer be investing in refining operations with Albemarle in China that would have converted spodumene concentrate from Wodgina into a more expensive lithium hydroxide product. MinRes had been eager to build a lithium hydroxide processing plant with Albemarle in WA, but the Chris Ellison-led miner decided to go its own way. In the interim, MinRes established the office and a warehouse in China and entered a transitional tolling deal with Albemarle “allowing MinRes to continue building its team in China.” A tax transparency report attached to MinRes’ most recent full-year accounts revealed that despite recording revenue of $306 million from third-party sales, Ningbo managed to rack up a $172 million loss for the 2024 financial year. Accounts for Lithium Resources UK said the wholly-owned subsidiary “Lithco Lithium Ningbo has ceased operations pending review of market conditions”. A MinRes spokesman told The West Australian the miner had “altered its strategy and ceased the tolling operation” following a global decline in prices. But MinRes declined to say who the third-party sales were made to. “Approximately two years ago, MinRes established Lithco Lithium Ningbo (LLN) in China for the import of spodumene from MinRes’ Australian operations for sale or conversion to lithium battery chemicals,” the spokesman said. “Third parties were engaged to facilitate downstream toll conversion. “As outlined in the MinRes FY24 Tax Transparency Report, MinRes provided funding to Lithium Resources UK (LRUK) which was used to invest in the Chinese operations through LLN,” he said. “In preparing the most recent accounts for LRUK, a decision was taken to impair the value of its investment into China.” MinRes declined to comment if an inventory writedown was part of the $60.7m impairment, given lithium hydroxide has a shelf life of just six months. Ningbo’s accounts are hidden to the public owing to China’s Great Firewall. MinRes declined to provide the accounts.