Corporate titans are splashing the cash to turn up the volume on Aussie lithium
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Delta Lithium (ASX:DLI) boss David Flanagan says the movement of some of the world’s largest commodity traders and conglomerates into lithium ‘speaks volumes’ about the lightest metal’s significance to the global economy.
Formerly known as Red Dirt Metals, the $300 million explorer was looking for gold when it sunk the drill bit into what is now a 12.7Mt at 1.2% Li2O lithium ore body at its Mt Ida project in WA’s Goldfields.
It is now one of a handful of emerging lithium stocks in a jurisdiction home to around 50% of the world’s production of the key electric vehicle battery ingredient.
Despite WA’s supremacy in the supply of the commodity, it is the only new lithium project currently going through the approval process in WA, with DLI aiming to secure permits for a direct shipping ore operation before Christmas this year.
The progress the firm has made has convinced major Japanese investor Idemitsu, which already bought up a 2.8% stake worth $5m in January, to beef up its cut in Delta with a $46.4m placement yesterday taking its stake to 15%.
The conglomerate, perhaps best known in Australia for its stakes in coal mines on the East Coast, has agreed to vote with Flanagan’s board on change of control transactions as long as Flanagan – the former boss of upstart iron ore player Atlas Iron – stays in the exec chair role.
That will give a layer of protection against hostile bids, especially interesting since Delta has Chris Ellison’s MinRes and Gina Rinehart’s Hancock on the register and corporate interest in WA lithium juniors has surged of late.
Speaking of Rinehart, her partners in the Mt Bevan magnetite project, Indian-backed Legacy Iron Ore (ASX:LCY) and Hawthorn Resources (ASX:HAW) both entered trading halts yesterday amid speculation the three would take the plunge on a lithium exploration JV not far from Mt Ida.
But Flanagan – who denies Idemitsu’s 15% holding is a ‘blocking stake’ – says the investment from the US$6.2 billion capped firm shows how serious the world’s biggest companies are in their conviction in the lithium market.
Flanagan says Idemitsu has been a close observer in the WA lithium scene for at least three years and had shown interest in Delta’s greenfields Yinnetharra project – which Flanagan thinks could end up even bigger than Mt Ida – even before Delta picked it up.
“It speaks volumes if you’ve got large companies who have a global view on the flow of commodities, on the flow of capital, construction capital, and the manufacturing industries around things like batteries, or electric vehicles, or electric storage, and all of that,” he told Stockhead.
“They’re also very sensitive to policy in all jurisdictions, so if they’re investing in lithium technologies or lithium companies or exploration companies looking for lithium or mining companies, I think it speaks volumes.
“Idemitsu has been trading for 112 years, so they don’t just rush off and do stuff that’s not very, very well considered.”
The funding, conducted at an 8% premium of 70.75c per share, will give Delta a war chest of around $90 million to help develop Mt Ida and expand its Yinnetharra project.
At the latter, where drilling has been completed on a 160m by 80m spacing and a resource is yet to be posted, Flanagan has flagged a doubling of activity in a program next year pending results from the current 90,000m campaign.
Results yesterday enhanced DLI’s understanding of what it calls a ‘Lithium Mile’ at its Malinda prospect, where six mineralised pegmatites have been defined and lithium mineralisaton has been found from the surface to 350m depth.
There is a new wave of lithium explorers rushing elsewhere, with Canada emerging as the new
Gangster’s lithium explorer’s paradise.
But Flanagan says WA remains the best place to go drill for spodumene.
And it has attracted the most intense corporate interest from the large players. Delta’s $46.4m investment from Idemitsu comes after SQM paid up $20m for 19.99% in Mark Creasy backed Azure Minerals (ASX:AZS) earlier this year.
US giant Albemarle has signalled its intentions with a rejected $5.5 billion bid for WA’s next major producer Liontown Resources (ASX:LTR) and IGO (ASX:IGO) and Tianqi were recently scuppered in an attempted $136 million takeover of Essential Metals (ASX:ESS) by an interloping MinRes.
A veteran of the China-demand led iron ore boom of the 2000s and 2010s, Flanagan says WA remains preferable to places like Canada when you talk about exploring for, and mining, hard rock lithium.
While the roadblock to entry in the iron ore boom was the control of the Pilbara’s key port and rail infrastructure by major players BHP (ASX:BHP) and Rio Tinto (ASX:RIO), now it is likely to be permitting and construction timelines.
Flanagan says the company’s engagement with the government has been good, but cautioned it would probably take around three years to permit a greenfields project like Yinnetharra.
Idemitsu, which turns over $70b in revenue each year and operates in renewables, resources, materials, lubricants, retail fuel and ag, has a target to reduce its emissions by 46% on 2013 levels by 2030 and reach carbon neutrality by 2050.
Its Australian boss Steve Kovac called Delta’s Mt Ida and Yinnetharra “the most exciting pre-development lithium projects in Australia.”
Idemitsu, which recently sold its Ensham Resources coal subsidiary in Queensland to South Africa’s Thungela, has also taken stakes in companies developing other critical minerals projects in Australia, including privately owned Vecco Group and ASX-listed Critical Minerals Group (ASX:CMG), both seeking to develop vanadium projects in Queensland.
“Idemitsu’s second major investment in Delta Lithium is another exciting move as we double down on our strategic investments in critical minerals as the world turns to a more advanced renewable future,” Kovac said.
“As global demand for critical minerals and rare earths grow, we continue to target investment opportunities with a focus on energy-related minerals including lithium, vanadium, copper, nickel and graphite.”