Monsters of Rock: Some of the quarterly reports you may have missed and billionaire spoiler halts lithium takeover
IGO (ASX:IGO) and its partner in arms, China’s Tianqi, have been on the trail of lithium tiddler Essential Metals (ASX:ESS) since early this year, lobbing a premo $136 million bid for the lithium minnow.
Despite its relative obscurity — Essential’s sole spell as a miner was in a previous life as caesium producer Pioneer Resources — its Pioneer Dome project was a rarity, at the time of the deal’s announcement in January, as one of only 14 declared spodumene resources in Australia.
Given its all cash nature and more than 40% premium, the 50c per share offer felt like a foregone conclusion.
That is until billionaire Chris Ellison’s MinRes (ASX:MIN) stepped on the scene last week.
Tianqi and IGO seem to have been looking at Essential as either a beachhead to expand into a new lithium domain around Norseman in the Goldfields, some way from their Greenbushes mine near Bridgetown, or as potential feedstock for future expansions of their recently commercial lithium hydroxide processing plant in Kwinana.
But MinRes is a big dog in the region with its 50-50 JV with China’s Ganfeng at the Mt Marion mine nearby, and plans to move into downstream processing of lithium hydroxide for EV batteries.
After building up a 19.55% stake in Essential, disclosed last Friday, MinRes proved an effective blocker.
In a scheme vote today Essential fell well short of the 75% vote needed to approve its acquisition by TLEA, with holders representing just 31.53% of securities supporting the bid.
ESS and TLEA now have a day to reach an agreement on an alternative deal or either party can terminate it. TLEA can also terminate the agreement on the grounds ESS’ shareholders have not agreed to the scheme.
There’s no word yet on an alternative bid by MinRes. ESS said in a note to the ASX today that voting patterns changed significantly after MinRes starting buying shares up on-market at prices above the takeover offer.
“The Essential Board respects the wishes of the shareholders who voted against the Scheme and will now engage with TLEA to determine the next steps in accordance with the Scheme Implementation Agreement,” ESS chairman Craig McGown said.
“The Company will provide a more fulsome update on its forward plans for the Pioneer Dome Lithium Project in due course, noting that whilst the SIA remains in place, the Company cannot engage with potential strategic off-take partners and with Mineral Resources Limited, which recently acquired a 19.55% stake in the Company.
“Pioneer Dome is a strategic asset and one of few independently owned undeveloped lithium deposits in Australia. Following the recently completed Scoping Study, Essential believes that it remains in a strong position to unlock the value of this asset for its shareholders.”
Iluka Resources (ASX:ILU) saw sales fall 34.3% on the quarter and 46.2% year on year in the March quarter to 101,600t of zircon sand, rutile and synthetic rutile on what it said was a seasonally slow time of the year.
With production only down 16.2% YoY to 150,900t, 59,300t of that zircon, that resulted in a 38% decline in revenue to $256.7m, down from $414m in the same period last year and $415.2m in Q4 of 2022.
However, Iluka says supplies of its mineral sands products remain tight with demand improving in the June quarter on the back of China’s reopening. Shipping constraints also pushed a 20,000t sale of synthetic rutile into the June term.
Its products are used downstream in things like ceramics, tiles and paint that will benefit from an improving outlook for China’s property market.
Zircon sand prices are expected to increase US$50/t in the June period.
“While China’s ceramic market restarted slowly after Chinese New Year on the back of softness in the real estate market, positive signs emerged later in the quarter, with home prices and land sales figures suggesting a recovery in housing demand,” Iluka says.
Other major market segments – fused zirconia, zirconium chemicals, refractories, and foundries remain relatively stable. Conditions in Q2 2023 are expected to improve as China’s re-opening gains momentum.
One notable report was Alumina (ASX:AWC), which revealed delays getting approvals to expand its bauxite operations in WA’s South West would result in lower grades at the Alcoa JV’s (40% AWC) Huntly mine into 2024.
A digester taken offline due to gas supply issues also remains off due to bauxite grades, with alumina production expected to come in at around 10.3Mt in 2023, down from previous guidance of 10.5-10.7Mt
Higher prices led the AWAC business to a lift in EBITDA from $50m in the December quarter to $103m in the March quarter, with its margin lifting from 4.2% to 8.1%.
“The global markets for alumina remained tight in the first quarter of 2023 leading to an increase in alumina prices, with the price peaking at $371/t in February 2023. Despite AWAC’s ongoing operational challenges and input cost pressures, the higher alumina price contributed to an earnings improvement in 1Q2023 compared to 4Q2022,” AWC CEO Mike Ferraro said.
“Alcoa continues to progress mine plan approvals in WA. The process has involved consultations with relevant regulators, provision of additional information and proposed enhancements to environmental controls. As previously announced, AWAC is reducing bauxite grades at the Huntly mine in WA in order to extend the ore supply available under existing approvals. Given the additional time being taken in obtaining relevant approvals, the impact of lower bauxite quality is now expected to continue into 2024.
“Despite these near-term challenges, the longer-term outlook for the alumina market is positive, with the anticipated growth in aluminium metal consumption driven by de-carbonisation. AWAC’s portfolio of bauxite and refinery assets provides Alumina Limited with a unique position to benefit from this growth.”
Meanwhile, troubled gold and base metals play Aurelia Metals (ASX:AMI) shot up more than 7% after a positive quarterly update.
Its Cobar region mines delivered a 21% lift in gold production, 23% rise in zinc, 21% jump in lead and 29% fall in all in sustaining costs.
At 26,100oz and AISC of $1884/oz (from 21,600oz and $2638/oz in the December quarter), AMI says it is on track to hit its AISC guidance of $2300/oz at a YTD AISC of $2336/oz.
After suspending work on a decline at the new Federation mine last year after a funding debacle, the company expects contractor Redpath to remobilise once an “advanced” funding process is complete, with development of the decline expected to resume towards the end of the June quarter.