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Wesfarmers defers final investment decision on Mt Holland lithium project

The Wesfarmers Ltd (ASX: WES) share price will be on watch on Friday after it released an update on its lithium operations.

What did Wesfarmers announce?

Wesfarmers has announced that it has completed the definitive feasibility study (DFS) of the Mt Holland lithium project.

The Western Australia-based project was acquired in 2019 when Wesfarmers snapped up Kidman Resources in a $776 million deal.

According to the release, following the completion of the DFS, a final investment decision on the project has been deferred. This is to enable additional actions to enhance the long-term value of the project.

A DFS in November by joint venture partner Sociedad Quimica y Minera de Chile (SQM) confirmed that the Mt Holland lithium project presents a world-class opportunity to develop an integrated large-scale, long-life and high-grade operation in Western Australia.

However, following a review of the DFS, Wesfarmers and SQM have agreed to undertake additional work which will result in the deferral of the final investment decision on the project to the first quarter of calendar year 2021.

This includes conducting further work to optimise project design to reduce capital and operating costs. This appears to be in response to subdued lithium prices that have been weighing on the likes of Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE) over the last couple of years.

Wesfarmers managing director, Rob Scott, said: “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.”

This was echoed by SQM’s chief executive officer, Ricardo Ramos. He added: “Our work to date confirms that Mt Holland is a high-quality project which will play an important role in the global lithium market. We are pleased with the work that has been done with Wesfarmers since they joined the project and believe it will continue to benefit from their significant local infrastructure, experience and capability in chemical processing.”

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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