Top lithium producer Albemarle (NYSE:ALB) is ready to increase its output by paying US$1.15 billion to form a lithium joint venture with Australia’s Mineral Resources (ASX:MIN).

Under the deal, Albemarle and Mineral Resources will own and operate the Wodgina hard-rock lithium mine in Western Australia, and plan to develop a plant producing lithium hydroxide for batteries.

After the news, shares of Mineral Resources jumped almost 30 percent on Thursday (November 22), while Albemarle’s remained flat.

During the first stage of the project, the joint venture plans to build a plant to produce up to 750,000 tonnes a year of 6-percent spodumene concentrate to feed a 50,000-ton-a-year lithium hydroxide plant.

“This agreement is consistent with our corporate strategy of pursuing merger and acquisition opportunities that can accelerate and de-risk our organic growth strategy,” said Albemarle CEO Luke Kissam.

“We feel confident in leveraging this world-class lithium resource with an experienced and knowledgeable mining company like MRL to help meet the growing demands of our global customers.”

Albemarle will need to spend another US$300 to US$400 million to develop Wodgina, according to Morningstar, and is expected to manage the marketing and sales of the joint venture.

The New York-listed company also holds lithium brine assets in the Salar de Atacama in Chile. Last week, its plans to expand its production in the region were rejected by Chilean environmental regulators.

Meanwhile, Mineral Resources had been in the process of selling Wodgina since May this year.

“Our proven local Western Australian capability is extremely well complemented by Albemarle’s proven technical downstream processing expertise and their international marketing capabilities in lithium and other energy storage minerals,” Mineral Resources Managing Director Chris Ellison said.

The two companies have signed an exclusivity agreement and aim to reach a binding agreement by December 14.

The deal also comes at a time when lithium hydroxide, which is directly extracted from hard-rock assets, is being favored for its use in higher-energy-density batteries. Some experts believe hydroxide production will grow, but not as fast as many believe. 

On Thursday, shares of Australian Mines soared 26.59 percent, trading at AU$15.76 as of 12:00 p.m. EST. Meanwhile, shares of Albemarle were down 0.23 percent, trading at US$95.52.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.