Australia’s Kidman Resources (ASX: KDR) and Chilean partner SQM (NYSE: SQM) may lose their right to develop their Mount Holland lithium project in West Australia after a ruling issued by a unit of the state government in charge of mining leases.
On Wednesday, West Australia’s Warden’s Court urged Mines Minister Bill Johnston to refuse Kidman’s request to be exempt from minimum expenditure obligations over 13 mining tenements held by its subsidiaries.
The recommendation, which follows a hearing in November last year, puts a question mark over whether the companies will keep their right to develop the asset into a mine. There is now the risk of those tenements being forfeited to other parties that made claims on them against the former owner.
The Melbourne-based miner has not responded to the recommendation, but put its shares in a trading halt right after it. SQM, however, issued a statement in which describes the properties as a “requirement for the development of the project”.
It also said the tenements were yet to be transferred to the joint venture.
“Although this recommendation by the Warden’s Court is not a final decision on the requested exception, which should be made by the Mining Minster of Western Australia, it could generate uncertainty or delay the project,” SQM said in the statement.
Companies holding mining tenements in West Australia have a responsibility to develop them, which requires a minimum expenditure usually in exploration, which is set by the government.
Kidman Resources bought the historic Mt Holland goldfield for $3.5 million in late 2015. It soon identified the asset’s lithium potential as well as the Earl Grey lithium deposit.
SQM invested $110 million into Kidman in 2017 to jointly develop the 44,000-tonnes-per-year Mt Holland project and so be ready to meet an increasing global demand for the coveted white mineral, used in the manufacturing of the batteries that power electric cars.
Experts expect the need for the commodity from battery makers alone to jump 650% by 2027, while overall demand is forecast to rise more than threefold in the next nine years.
History of such disputes in WA always show that the Ministry for Mines uses its legal powers to over ride the mining act in favour of rights to mine development remaining with the existing company that invested large sums in the tenements or nearby tenements and need the plainted tenements. It will be awarded to Kidman and the dirty plainters in this instance chasing under expenditure years ago by another owner will not be awarded these tenements.