Lithium play Azure says ‘yes’ to SQM’s revised cash offer that values it at $1.63bn
Link copied to
Azure has emerged from suspension with an unanimously recommended takeover proposal from SQM that values it at an eye-popping $1.63bn, or $3.52 per AZS share.
The cash offer, which represents a 55.9% premium to the 10-day volume weighted average price for AZS shares of $2.26, represents a 52.4% premium to the previous offer of $2.31 per share – a clear sign of how keen the Chilean lithium giant is to fold in the Andover lithium project into its portfolio.
And why shouldn’t it?
Andover has been the darling of lithium pundits since Azure Minerals (ASX:AZS) intersected thick, lithium mineralisation (105m grading 1.26% Li2O) in June this year.
Subsequent drilling at the project, which is owned in partnership with legendary prospector Mark Creasy’s Creasy Group (40%), proved that this was no fluke by returning multiple +100m intersections including a top 209.4m interval at 1.42% Li2O.
This was enough for the company to define an exploration target of between 100Mt and 240Mt with a grade range of 1-1.5% Li2O, which would place Andover amongst the largest lithium deposits even if resource come in at the bottom end of the range.
Recent drilling at Target Area 3 has returned thick intersections of spodumene mineralisation of up to 35.6m, which lends support to the company’s belief that Andover is one of the best lithium exploration projects globally.
Early stage testwork has also resulted in the production of spodumene concentrate with a grade of 5.59% Li2O at recovery of 82.37%.
The discovery of Andover, success of subsequent exploration and SQM’s initial interest have all contributed to the 918% increase in the company’s share price to $2.44 since the beginning of this year to when it entered into a trading halt last week.
Shares in the company rocketed to $3.41 after it exited suspension, giving it an YTD gain of 1450%.
After having its first offer in August rebuffed, SQM revised cash offer of $3.52 per AZS share under a binding transaction implementation deed has been unanimously recommended by Azure’s board in absence of a superior offer.
It is also subject to an independent expert concluding that the offer is fair and reasonable as well as being in the best interests of shareholders.
Major shareholder Delphi Group, which holds 10.8% of the company’s shares, has already committed to supporting the transaction.
Andover partner the Creasy Group could be due for a sizeable payout for its 13.2% stake in the company if it chooses to accept SQM’s offer.
Participants in Azure’s recent equity raising priced at $2.40 per share will also be pocketing a 46.7% gain on their investment.
Highlighting just how keen it is to bring Azure under its umbrella, SQM has also simultaneously made a conditional off-market takeover offer of $3.50 cash for each AZS share if the scheme of arrangement falls through.
Managing director Tony Rovira said the board had unanimously concluded that the transaction is in the best interests of the company’s shareholders following careful consideration of its merits.
“Whilst we firmly believe that Andover has the potential to be a major lithium project, there is significant time, cost and risk associated with developing a project of this scale, particularly in the context of an uncertain broader economic outlook,” he said.
“As such, the board believes that the transaction provides Azure shareholders with a compelling opportunity to de-risk their investment and realise certain value at an attractive premium to historical trading levels.
“The transaction also presents a great outcome for other stakeholders in Andover, who will benefit from the project being developed by an experienced, well-capitalised and highly regarded company in SQM.
“The board is very proud of the significant achievements of the Azure team to date, including the discovery of the world-class lithium deposit at Andover, and believes that the transaction represents a fantastic culmination of all the hard work over many years.”
This article was developed in collaboration with Azure Minerals, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.