IPO Watch: Could this FMG backed lithium IPO be Lightning in a bottle?

New FMG-backed lithium IPO Lightning Minerals is searching for the hot commodity near Liontown Resources’ Buldania deposit
Led by former Critical Resources boss Alex Biggs, the company is chasing $4.5-7m in a PAC Partners led raising
Battery metals have dominated the resources IPO landscape in 2022

Iron ore squillionaire Andrew Forrest’s private investment vehicle Tattarang has spent hundreds of millions of bucks through its mining arm Wyloo Metals to fund investments in nickel and rare earths, some of the commodities most in demand for the electrification of transport.

It is a thematic that has, alongside a crunch in fossil fuel supplies, dominated the investment narrative in 2022.

While Wyloo has been traversing into diversified territory for Forrest’s resources empire, his main game Fortescue Metals Group (ASX:FMG), where the big man just returned as executive chairman, has been a bit more gun-shy.

It is, of course, planning to spend billions through its green energy arm Fortescue Future Industries on much wackier and more wonderful things like commercial scale green hydrogen.

But from a mining perspective, save from some minor copper exploration leases in South Australia and South America, FMG has been an iron ore playground.

You’ll be interested to hear then that it is dipping its toes into lithium, not as a miner just yet like bigger rival Rio Tinto (ASX:RIO), but by vending some ground picked up a few years ago near Norseman into new IPO hopeful Lightning Minerals.

FMG will hold around 3% of the company depending on IPO subscriptions.

The right postcode?

Lightning, which lodged its prospectus with ASIC last week, and lead manager PAC Partners are chasing between $4.5 and $7 million from investors at 20c a pop to float the company.

It will be the latest of many. Normally flooded with gold juniors, battery metals has become the dominant IPO class in 2022 as lithium prices have charged through the roof.

As many as 16 of the 29 resources companies floated in the June Quarter, for example, were exploring for EV metals.

Spodumene spot pricing is above US$7000/t by at least one price agency’s analyses, with lithium chemical prices in China above the critical 500,000RMB per tonne level that gets Chinese regulators all hot under the collar.

That’s above US$70,000/t in more commonly quoted terms, more than three times higher than levels seen a year ago.

Those tenements that FMG subsidiary FMG Resources — slyly a major tenement holder in the Eastern Goldfields despite the Pilbara being the main focus of its parent — is vending into the float are known as the Dundas project and cover around 450sqkm between 35km northeast and 105km northeast of Norseman.

Geologically, the project is a perfect nearology play for $3.3 billion Liontown Resources’ (ASX:LTR) Buldania.

That included the Anna pegmatite, where LTR has outlined a spodumene resource of 14.9Mt at 1% Li2O (lithium oxide or lithia).

Also in close proximity to tenements in the northeast of the package is the Bald Hill lithium and tantalum project, a mothballed spodumene asset containing 26.5Mt at 1% Li2O and 149ppm tantalum pentoxide with additional tantalum resources of 4.4Mt at 336 Ta2O5.

Traditionally viewed as gold country since 1893, Lightning says previous exploration has focused on nickel, gold and to a lesser extent, copper and PGEs, though pegmatite dykes have been identified within and adjacent to the Dundas project.

While lithium will be the main game, with Dundas to receive around 60% of Lightning’s technical budget, it also boasts projects with gold and base metals potential at Mount Jewell, 55km north of Kalgoorlie, Mailman Hill near Leonora and Mt Bartle, which surrounds the Magellan Lead Mine near Wiluna.

Good neighbours

The project is being led by managing director Alex Biggs, previously the MD and CEO at Critical Resources (ASX:CRR) when it acquired the Mavis Lake lithium project in Canada.

While the IPO market has lost some ground in 2022, Biggs told Stockhead battery metals were a good place to be for a low EV junior.

“It’s certainly less busy now in the IPO space than it was a few months back, a year back,” he said.

“Obviously midyear this year, it’s slowed down quite significantly.

“But lithium we still see as strong, I see that thematic of critical minerals being strong moving forward. It’s a great place to park yourself and be exposed to that.

“Having a new company gives us an opportunity to build from a relatively low EV into something that we can be proud of.”

As well as the investment from Fortescue and the proximity to Liontown’s Anna pegmatite, Biggs said the Norseman district was becoming a closely watched exploration domain.

“Our tenements are very close to that and surrounding that, we see continuous lithologies from (Liontown’s) tenements into our tenements,” he said.

“We have a northern tenement as well, which is up near Bald Hill lithium-tantalum mine.

“Having good neighbours around you like that is very, very exciting and there’s a lot of good work in the region.

“Galileo Mining (ASX:GAL) of course, Larvotto (ASX:LRV) directly to the south of us.

“So there’s a lot of activity in that region, it’s very hard to acquire ground down there. We see it as highly prospective, it’s a proven base metals region, and it’s an emerging lithium district too.”