The Wesfarmers Ltd (ASX: WES) share price will be on watch for a couple of reasons on Thursday.
As well as releasing its half year results, the conglomerate has just provided an update on its lithium operations.
What did Wesfarmers announce?
After deferring its final investment decision (FID) for the Mt Holland lithium project in January 2020, Wesfarmers and its joint venture partner, Sociedad Quimica y Minera de Chile S.A. (SQM), have now come to a final decision on the project.
According to the release, full funding will be committed upon receiving environmental approvals for the Kwinana refinery, which are anticipated in early FY 2022.
The company also advised that it has completed an updated definitive feasibility study (UDFS) for the Mt Holland lithium project.
The UDFS has provided greater certainty regarding the project’s engineering design and capital and operating costs. Furthermore, it has led to an increase in concentrator and refinery production capacity from 45,000 tonnes per annum to approximately 50,000 tonnes per annum of battery grade lithium hydroxide.
In addition, the UDFS includes increased flexibility to provide for a second phase of the project to expand production capacity at Mt Holland and the Kwinana refinery. Management advised that preliminary work to evaluate expansion options will commence in parallel with the construction of the first phase of the project.
Wesfarmers’ share of capital expenditure for the development of the project is estimated at approximately $950 million and will be funded using existing cash and debt facilities.
When will Wesfarmers be producing lithium?
Following receipt of all relevant approvals, construction of the mine, concentrator, and refinery are expected to commence in the first half of FY 2022.
After which, the first production of lithium hydroxide is expected in the second half of the 2024 calendar year.
Wesfarmers’ Managing Director, Rob Scott, is very positive on the project and expects it to create value for shareholders.
He said: “The development of the Mt Holland lithium project presents an attractive investment for Wesfarmers shareholders. The project capitalises on our Chemicals, Energy and Fertilisers divisions’ chemical processing expertise and Western Australia’s unique position to support growing global demand for electric vehicle battery materials which will make a crucial contribution to global efforts to reduce greenhouse gas emissions.”
“We have been pleased with progress of discussions with key battery manufacturers, which reflect a positive outlook for battery quality sustainably sourced lithium hydroxide,” he concluded.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.