Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Chile’s Sociedad Química y Minera de Chile (SQM) will buy the rest of Australian lithium developer Azure Minerals that it doesn’t already own for $900 million, as chemicals makers fight to secure earlier stage supply of raw materials for the electric vehicle industry.
The deal, announced by SQM and Azure in separate statements, implies an equity value of A$1.63 billion ($1.03 billion) for the lithium producer, whose stock value has surged by more than 10 times this year.
Azure, which owns around 60% stake in the highly prospective Andover lithium project in Western Australia’s Pilbara region, previously rejected a buyout bid from SQM that valued the miner at A$901.4 million.
SQM, the world’s second-biggest lithium chemicals maker, bought a 19.99% equity stake in Azure for A$20 million in March. The deal helps secure feed for its A$1.9 billion Mount Holland lithium hydroxide project Western Australia that it is building with Australian conglomerate Wesfarmers.
Emerging Australian lithium companies are witnessing a surge in buyouts as their lower valuations and cash needs attract some of the world’s top producers of the battery material and other suitors who are racing to secure supplies. Azure does not expect to be in production until 2030.
Australia has become a more attractive destination for investment since major lithium producer Chile nationalised its industry earlier this year.
But while the sector is hot, pulling off a deal has not been easy. SQM had made multiple offers to secure Azure, Azure said in August, without specifying how many, while top chemicals maker Albemarle ditched a $4.2 billion deal for Liontown Resources this month after Hancock Mining took a blocking stake.
Under the new proposed deal, SQM agreed to acquire all of Azure’s shares at an offer price of A$3.52 per share, a premium of 44.3% to the stock’s last close of A$2.44 on Friday.
Coming off of a trading halt in the previous sessions, Azure’s shares climbed by 41% to A$3.42 on Thursday.
“Azure board unanimously recommend that Azure shareholders support the transaction by voting in favour of the scheme… in the absence of a superior proposal,” the company said in a statement.
($1 = 1.5898 Australian dollars)
(By Roushni Nair; Editing by Anil D’Silva, Subhranshu Sahu and Christian Schmollinger)
Read More: Azure Minerals rejects $585m takeover bid from SQM
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