Special Report: Azure Minerals expects the maiden mineral resource for its Andover lithium discovery to be released in the June quarter next year following the expected completion of the company’s joint takeover by Sociedad Química y Minera de Chile S.A. (SQM) and Hancock Prospecting.

Earlier this week, Azure Minerals’ (ASZ:AZS) announced SQM and Hancock were joining forces to acquire the Tony Rovira-led explorer via a scheme of arrangement for A$3.70 per share.

That implies a fully-diluted equity value for AZS of ~A$1.70 billion.

SQM operates major lithium carbonate brines on the Atacama Salar in Chile and holds a half stake in the Covalent Lithium JV with Wesfarmers incorporating the Mt Holland lithium mine near Southern Cross and a future lithium hydroxide plant in Kwinana, both in Western Australia.

The lithium giant originally took a near 20% stake in AZS at the start of the year before a major lithium discovery in June, which put the company on the map with an exploration target now set at Andover of 100-240Mt at 1-1.5% Li2O.

A resource of that size and grade would be among the largest Tier-1 resources in the world, if it can be achieved in a maiden estimate due in the June quarter next year.

Back in October, SQM announced a A$3.52 per share offer (with a fall-back takeover offer of A$3.50) – but just a day later Hancock boss Gina Rinehart picked up a 18.3% stake in target.

Now, SQM and Hancock have teamed up, with AZS entering into a binding Transaction Implementation Deed (TID) with the joint bidders.

 

Board unanimously lends support 

If the scheme is not successful, SQM and Hancock will go for an off-market takeover for A$3.65 per share which would still value the company at a tidy A$1.68 billion.

No surprise then that the AZS board has unanimously recommend that shareholders support the transaction by voting in favour of the resolutions to approve the joint bid arrangements and the scheme proposal, and by accepting the takeover offer as a backup.

“The transaction delivers a fantastic outcome for Azure shareholders, including a significant uplift in value from the original SQM transaction despite elevated market volatility and the recent deterioration in lithium prices,” AZS MD Tony Rovira said

“The transaction also represents a great outcome for wider stakeholders in Andover, who will benefit from the significant financial strength and expertise of one of Australia’s largest and most well-respected mining and exploration companies, Hancock, combining with SQM to oversee the successful development of Andover.

“We encourage all Azure shareholders to support the transaction.”

Two of Azure’s major shareholders, Creasy Group and Delphi Group, each intend to support the transaction, subject to no superior proposal to acquire 100% of the issued capital of AZS emerging.

 

Shareholder meeting in March

The scheme proposal represents a 63.9% bump to the 10-day VWAP of A$2.26 per share up to and including Friday, 20 October 2023, being the last practicable trading date prior to the announcement of the original SQM transaction – which by the way SQM will be required to proceed with in the event the scheme or takeover offer is unsuccessful.

Either way, it’s a win-win for Azure.

The next step is for BidCo to obtain approval from Australia’s Foreign Investment Review Board (FIRB).

Then, a meeting of shareholders to approve the transaction is expected to be held in mid-March 2024, with the scheme to be implemented shortly thereafter – if successful.

 

 

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.

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