Wesfarmers share price lower despite lithium expansion news

Wesfarmers is going to be searching for lithium on a very large plot of land.

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a miniature moulded model of a man bent over with a pick working stands behind a sign that has lithium's scientific abbreviation 'Li' with the word lithium underneath it against a sparse bland background.

Image source: Getty Images

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The Wesfarmers Ltd (ASX: WES) share price is edging lower on Monday.

At the time of writing, the conglomerate's shares are down 0.2% to $50.19.

What's going on with the Wesfarmers share price?

It appears that market weakness is offsetting some potentially positive news out of the Wesfarmers camp today.

That news relates to the company's lithium operations, which have been expanding their footprint in Western Australia.

According to an announcement out of Ora Banda Mining Ltd (ASX: OBM), it has entered into a binding farm-in agreement with Brenahan Exploration, which is a wholly-owned company in the Wesfarmers Chemicals, Energy & Fertilisers (WesCEF).

The agreement is for Wesfarmers to take 65% of all mineral rights other than gold and by-products held by Ora Banda on the Davyhurst tenement package. This tenement covers 140km of strike and an area of over 1,100km2.

Wesfarmers has agreed to pay $26 million cash consideration and a 2% royalty for the mineral rights. It also has the option of increasing its interest to 80% by sole funding an additional $15 million of exploration expenditure on the tenements over the next three years.

Ora Banda's Managing Director, Luke Creagh, said:

The Davyhurst tenement package is very large and has never had any sustained or modern exploration programs given its disjointed and under-capitalised historical ownership. Although we have had encouraging early stage lithium results, Ora Banda is a gold focused company and given the underexplored nature and size of this belt, we expect it would take many years to do it justice for other minerals.

We are very excited by this transaction as WesCEF is a high calibre strategic partner who has the technical expertise and capability to unlock the belt for minerals that are non-core to Ora Banda. The WesCEF team that will work on this tenement package has a track record of success as they discovered and are helping deliver the Mt Holland Lithium Project.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. 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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