By Glenn Dyer | More Articles by Glenn Dyer

Market talk that Mineral Resources has been mulling the spinning off of its lithium business has set some analysts to speculating that the high-grade business could in fact be a target for another company with ambitions in the area.

MinRes CEO Chris Ellison says nothing has been decided and the company always looks at its businesses.

But some analysts wonder why he would be interested in spinning off his company’s emerging lithium operations and all the potential future growth that goes with them and retain the old-fashioned earth moving, oil and gas and iron ore operations – such as the new $3 billion Red Hill JV with Baowu of China and other partners.

News of the possible spinoff and listing saw MinRes shares rise $2 billion in value in a couple of days, which may have been the point of the rumour – it has helped make news of the new iron ore mine more palatable.

The news saw brokers, led by Credit Suisse, gush dollars and compare MinRes to the performance of Albemarle, which has revealed three upgrades in 2022 revenues and earnings already because of the surge in lithium demand and prices.

As it ponders its future line up, MinRes has again increased its shareholding in Global Lithium Resources – from 5.12% to a tantalising 8%.

Global Lithium has two lithium projects in Western Australia – its wholly-owned Marble Bar project in the Pilbara and the Manna project (80%) further south in the Goldfields.

The company recently reported the highest-grade lithium intercept yet at Manna, hitting 5.7 metres at 1.82% lithium oxide (Li20) from 136.7 metres, with higher grades in that intersection.

Global Lithium is currently advancing a 380-hole, 60,000 metre reverse circulation (RC) drilling campaign at Marble Bar.

Global Lithium though does have one impediment – it has a significant Chinese presence on its share register and, as far as the US government is concerned, that is a no-no.

Global says its major shareholders include Suzhou TA&A Ultra Clean Technology Co. Limited (Suzhou TA&A), a controlling shareholder of Yibin Tianyi Lithium, a joint venture between Suzhou TA&A (75%) and CATL (25%), the world’s largest EV battery producer, and MinRes.

But could there be a readymade buyer for MinRes’s lithium business (or even MinRes itself) in the shape of Tesla?

Tesla remains the company to watch in the lithium space. CEO, Elon Musk is clearly frustrated by the cost of the key raw materials for his battery business and for the batteries he buys from the likes of Panasonic and clearly wants control of the entire process.

Tesla sparked considerable interest earlier this month when it revealed that it was “evaluating the possible development of a battery-grade “lithium hydroxide refining facility,” in the Texas Gulf Coast, according to a filing with the Comptroller’s Office in Texas.

CEO Elon Musk has tweeted previously that Tesla might have to enter the mining and refining industry directly at scale as lithium prices surge – but like so many things on his mind, nothing has come of it.

If Tesla’s regulatory permit applications are approved, construction could begin in the fourth quarter of this year and reach commercial production by the end of 2024, the EV maker said in the filing.

Under the plan, Tesla will ship the final product from the refinery by truck and rail to various Tesla battery manufacturing sites supporting the supply chain for large-scale and electric vehicle batteries, the electric car maker said it its application.

Tesla said it is also looking at a site in Louisiana for the project.

Securing a steady supply of battery components is critical for Tesla as it faces mounting competition from rivals, especially BYD, China’s champion and now the biggest EV maker in the world.

Elon Musk has spent much of the last year agitating for rapid development in lithium mining in North America, comparing the opportunity to the fat margins typically made in the software industry.

“I’d like to once again urge entrepreneurs to enter the lithium refining business. The mining is relatively easy, the refining is much harder,” Musk said on Tesla’s second-quarter earnings call in July. “You can’t lose, it’s a license to print money.”

Dozens of projects are underway to add similar plants in other nations, including developments in the UK, US (lots of factories using imported lithium), Germany and Australia, which began production at a first refinery earlier this year.

Albemarle, the world’s top lithium producer, is planning to build a new processing site in the southeastern US and has a plant under construction in WA and is in a JV with MinRes, which offers MinRes some protection from a company like Tesla and presumably would extend to any lithium spinoff.

MinRes had a market value of nearly $A14 billion this week and Albemarle, $US35 billion or around $A40 billion which puts it out of Tesla’s reach even though the latter is valued at more than $US670 billion.

Musk has to sort out his vain attempt to by Twitter for too much money – a deal aborted by the collapse in tech share prices and Musk’s own ego. Now a court in the US will decide (and probably the US Supreme court when it comes to that) the outcome.

But Musk is still at Tesla and seems to be driving a new approach to selling cars in China, according to a report late this week from Reuters which says the US EV maker wants to abandon many of its CBD stores and move them to the suburbs in big cities (as it has done in parts of the US) to allow for car sales and repairs to be done in the one place (like many of its ICE rivals have done for decades).

Reuters reported that as part of that push, Tesla wants to hire more technicians and other staff for service jobs in China. Tesla’s China recruitment website showed more than 300 openings for service jobs this week.

Musk said last week on Twitter, in response to a Tesla owner in Texas who complained that he had been waiting a month to get his vehicle fixed, that he had made “advancing Tesla service to make it awesome” a top priority.

Unlike mainstream automakers, Tesla owns all of its own stores, rather than relying on dealers. It also sells its cars online. That has allowed it more leeway to adjust a retail strategy that had been initially modeled on Apple’s stores.

Tesla sold 400,000 China-made Model 3 and Model Y cars in the first eight months of the year, with 60% of them sold locally (and others exported to markets like Australia). That was 67% more than a year ago.

“The change in Tesla’s approach in China, where it has become the second-largest EV brand behind BYD, would reflect a recognition that it has to build customer loyalty now that it has established its brand in the world’s largest car market.” Reuters reported one unnamed analyst as saying.

A market maturing before it has reached its potential?

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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