Kidman to be acquired by Australia’s Wesfarmers

Australia’s largest company by revenue, Wesfarmers, has announced plans to acquire lithium developer, Kidman Resources, marking the first major lithium acquisition of 2019.

The deal between the multibillion-dollar conglomerate, which has major interests in chemicals, coal and fertilisers, could have wide repercussions for the global lithium market and the wider Australian resources sector.

Here, Benchmark Minerals outlines the key details of the deal and its potential impact on the lithium market:

  • As the largest Australian company by revenue, Wesfarmers adds a major stamp of approval to Kidman Resources and the lithium growth tailwind.
  • By choosing to pursue opportunities in lithium via M&A instead of bolstering its large specialty chemicals or coal portfolio, Wesfarmers could be the first in a wave of large diversified conglomerates that contemplate serious plays in the battery metals space. It also represents the migration of capital towards the energy storage supply chain, from companies that typically operate in larger, established commodity markets.
  • Wesfarmers has likely had the opportunity to study Kidman’s supply agreements with Tesla, Mitsui, and LG Chem. The deal would indicate that the offtake contracts are serious and bankable enough for a solid investment justification to shareholders. This lends further credibility to the involvement of automotive OEMs and major battery producers’ in the development of new projects.
  • With a strong asset portfolio and balance sheet, Wesfarmers is likely in a better position to execute the construction and ramp up of a battery-grade lithium chemicals facility .
  • Based on the structure of the Mt Holland JV with SQM, we believe SQM would have been party to discussions with Wesfarmers about their ability to complete this project together. The acquisition moving ahead indicates that SQM has likely given a stamp of approval for Wesfarmers as a credible JV partner. This event could foreshadow a wave of similar partnerships forming across industry players in the upcoming months.

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