After completing a definitive feasibility study, Wesfarmers and SQM have decided that further work is needed to make an investment decision.
Diversified company Wesfarmers (ASX:WES) has delayed an investment decision on the Mt Holland lithium project to the first quarter of 2021.
The Western Australian lithium project, which includes a mine and a concentrator at Mt Holland and a lithium hydroxide refinery in Kwinana, is being developed by Wesfarmers and SQM (NYSE:SQM).
After completing a definitive feasibility study for the property in November, the companies have decided that further work is needed to make an investment decision — including more talks to meet customers’ product specifications.
“Once completed, the project is expected to play an important role in the global lithium hydroxide market with a long-term outlook that remains attractive,” Wesfarmers Managing Director Rob Scott said in a statement on Thursday (January 23).
Wesfarmers took over 50 percent of the asset in May of last year after buying lithium developer Kidman Resources for AU$776 million.
Construction of the project was expected to start in the 2020 financial year. First production of lithium hydroxide from the refinery in Kwinana was originally anticipated in 2022, with an estimated annual production capacity of 45,000 tonnes.
Despite news of the delay, shares of Wesfarmers continue to trade on an uptrend. The company’s share price has increased 7.43 percent year-to-date. Similarly, top lithium producer SQM has had a positive year so far, with shares up 9.62 percent since January.
Also on Thursday, Galaxy Resources (ASX:GXY) said it will scale back output by about 60 percent at its Western Australian Mt Cattlin project in the first quarter of 2020 due to the current market conditions in the lithium space.
“The strategic drivers are to prioritise value over volume, generate positive free cash flow, preserve resource life and to maintain balance sheet capacity for advancement of the company’s development portfolio,” reads part of its press release.
Shares of Galaxy were trading down 4.31 percent on Thursday, but the company is still up year-to-date by 11 percent.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.