Monsters of Rock: Azure lithium takeover in the works, Syrah stonks

Azure Minerals paused for change of control transaction with SQM in box seat
Syrah up over 40% late in trade as graphite stocks get stonkin’ hot

Speculation a takeover is coming for lithium darling Azure Minerals (ASX:AZS) has hit fever pitch as the $1 billion junior entered a trading halt “pending a change of control transaction” this morning.

The likely suitor is SQM, the Chilean giant that is about to enter the WA production space in a mega JV with Aussie conglomerate Wesfarmers (ASX:WES) next year and had two bids for the company where it holds a major ~19.9% stake knocked back a couple months ago.

Whether Wesfarmers has a role remains to be seen, but activity had been brewing around the junior, which owns the massive Andover discovery in a 60-40 JV with billionaire prospector and WA resource soothsayer Mark Creasy.

Creasy recently spent big, spending over $16 million in placement to up his stake in Azure to 13.21%.

It gives him an effective ownership level over Andover, previously a nickel sulphide project where Azure made a major lithium discovery near the town of Roebourne earlier this year, of around 45%.

German investor Delphi, the investment vehicle of ASX resources punter Wilhelm Zours, is also a big player on the Azure register.

Azure was keeping mum when we tried to reach out yesterday.

A big premium would be an astonishing transaction at a time when lithium prices are in limbo, having fallen hard on a tipping supply-demand balance in China in 2023. While they have slid well over 50% from last year’s record highs, spodumene producers remain highly profitable.

While Azure is the talk of the town in Perth it remains pre-resource, with around 100,000m of drilling committed to hit a maiden estimate by March next year.

Its exploration target sits at 100-240Mt at 1-1.5% Li2O, enough if realised to make it something like a Tier-1 prospect.

It comes after Gina Rinehart showed her hand on her lithium aspirations, spending around $1.3 billion to scuttle Albemarle’s $6.6bn bid for Liontown Resources (ASX:LTR), expected to open the Kathleen Valley mine in mid-2024.

If you want to mine lithium, Australia is the place to be right now.

With its proximity to China and speed in bringing tonnes to market, WA is the world’s largest lithium producing jurisdiction, its hard rock spodumene concentrate making up around half of the world’s lithium raw materials.

SQM’s bid would mark a second further incursion into the space in the space of a day after it spent in the order of $3 million buying into junior explorer Pirra Lithium in a deal with Gary Morgan’s unlisted Haoma Mining.

SQM will eventually take a 40% stake in the three way JV with Haoma (20%) and gold producer Calidus Resources (ASX:CAI) (40%), which is looking for lithium around 20km south of Wildcat Resources’ (ASX:WC8) emerging Tabba Tabba discovery.

Azure Minerals (ASX:AZS) share price today

Graphite believers pile into Syrah

No stock signifies the volatility of the graphite market like Syrah Resources (ASX:SYR).

Emerging as one of the first true battery metals hopefuls under the watch of Tolga Kumova in the mid-2010s, the company’s fortunes have vacillated wildly since announcing first production under still serving MD Shaun Verner in late 2017.

Its Balama mine in Mozambique went under review as oversupply struck the market in 2019, eventually going into a temporary suspension as Covid hit in early 2020.

It was revived as Syrah’s fortunes soared as its strategy to go downstream via an anode materials plant in Louisiana in the USA caught the attention of the market.

But enthusiasm for the future Tesla supplier has waned amid a stagnant graphite price which has seen its Balama mine run on a campaign basis in recent months.

One stroke of the pen in Beijing has brought Syrah and its graphite peddling peers back to the good books of investors, who are punting that the west will accelerate efforts to build ex-China supply chains after a dramatic export decision late last week — the latest in a tit for tat game of F’ You between it and the west over EV and tech materials.

Syrah is up a rollicking 42% today.

China will bring in restrictions from December 1, requiring companies to get special export permits if they want to ship high purity, high-hardness and high intensity synthetic graphite and natural flake graphite-derived products out of the Middle Kingdom.

Other graphite materials used in steel, metallurgy and chemical production won’t be subject to the restrictions.

According to ING, quoting the US Geological Survey, China mines around 850,000t of graphite, accounting for 65% of the world total.

“Graphite prices are likely to rise, but China’s latest move will also intensify the need to find alternative sources of this key battery material and push production out of China,” ING’s Ewa Manthey said.

“Although China produces more than half of the global supply, but looking at global reserves, China is not the only option.

“Turkey takes the top spot (27%), followed by Brazil (22%), with the two countries owning half of the world’s natural graphite resources. China comes third at 16%, according to data from the USGS.”