Lithium Miner Deals, SQM’s Strategy, and Industry Prospects
The collaboration signifies an opportunity for SQM, the second-largest lithium producer worldwide, to establish a presence in Australia through an investment in Azure’s Andover project and a partnership with Hancock. The latter possesses local mining expertise and rail infrastructure valuable for mine development. This move comes amid a surge of transactions in the lithium mining sector. Despite the current depression in lithium prices due to slower-than-anticipated electric vehicle sales this year, long-term demand for the commodity remains robust owing to its role in the energy transition.
Overcoming Obstacles: SQM’s Partnership with Rinehart
By aligning with Gina Rinehart, whose company Hancock Prospecting acquired a stake exceeding 18% in Azure Minerals in October, SQM overcomes a significant hurdle to the completion of its takeover bid. SQM already holds a 19.4% stake in the company. Analyst Paul Howard from broker Canaccord believes that the joint offer bodes well for finalizing the transaction. In reaction to the news, Azure shares traded as high as A$3.71 on Tuesday.
Rinehart’s Drive for Lithium Processing Exposure
This joint bid represents a success for Rinehart in her pursuit of exposure to lithium processing. Analysts note that the notable magnate previously attempted a similar movement with Liontown Resources (ASX:LTR). In that instance, Hancock Prospecting acquired a substantial minority stake, thereby thwarting a takeover bid from leading global lithium producer Albemarle (NYSE:ALB). It is important to highlight that both the SQM-Rinehart bid for Azure Minerals and the previous attempted acquisition of Liontown Resources are all-cash proposals.
The off-market offer for Azure Minerals necessitates approval from a simple majority of shareholders. Moreover, it relies on the Australian Securities and Investments Commission’s discretion to permit investors who support the deal to retain their stakes. Consequently, major shareholder Mineral Resources, led by Australian billionaire Chris Ellison, could approve the transaction without selling its 13.6% stake, which it initially obtained at a price as high as $4 per share. Such innovative deal structures highlight the resourcefulness of investment professionals.
Mineral Resources declined to comment on the matter, while Azure Minerals expressed unanimous support from its board. The company encourages all shareholders to back the proposal unless a superior offer emerges. Other key Azure Minerals stakeholders, including Creasy Group (12.8%) and Delphi Group (10.2%), have informed Azure that they intend to sell their shares in the absence of a more compelling bid.