Movement in the lithium market

Reed Resources and Mineral Resources have announced a farm-in agreement for the development of the Mt Marion lithium project in WA's goldfields.

Efforts to establish Australia’s next lithium mine have taken a turn with Reed Resources and Mineral Resources yesterday announcing they have reached a farm-in agreement for the development of the Mt Marion lithium project in Western Australia’s goldfields.

According to the announcement from the two companies, Mineral Resources will conduct a feasibility study on the deposit with a view to operating the project and earning 40% of net profit.

Reed Resources will maintain the remaining balance of 60% profit, as well as the right to purchase all Spodumene produced.

News of the agreement comes nearly three weeks after Galaxy Resources announced it had raised $65 million via a discounted institutional capital raising in order to fund its soon to be developed Mt Cattlin lithium mine in Western Australia.

Used in batteries, glass, air-conditioning and chemicals, demand for lithium is widely forecast to triple over the next 10 years.

According to Reed investor relations manager Simon Hicks, despite the company’s farm-in agreement stipulating that Mineral Resources commence operations at Mt Marion by 31 December 2010, the deal structure does not represent an attempt to take more immediate advantage of expected increases in demand.

“Our role is to try and turn these projects into a cash flow as soon as we can as far as our responsibilities to our shareholders are concerned, and this (deal) allowed us to do that quickly and at minimum risk to the company,” he told MINING DAILY.

“That was the primary concern as far as trying to time demand trends.

“It is about turning the project into something real and turning it into a cash flow as soon as we can.”

Yesterday also saw an announcement from Galaxy Resources that it had signed an agreement with General Mining Corporation Limited to explore for lithium in Mongolia and Kazakhstan.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.