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If you want to get a sense of the pace of this year’s lithium investment boom, look no further than the acquisition of the Manna Lithium Project by Global Lithium Resources (ASX:GL1).
Today the lithium junior, which is hoping to emulate a couple of leading lights in Pilbara Minerals (ASX:PLS) and Mineral Resources (ASX:MIN) by exploring for spodumene in the Pilbara and Goldfields regions of WA, announced it would pay minority partner Breaker Resources $60 million for the 20% of the project it didn’t own.
That’s a damn sight more than precious metals junior Breaker (ASX:BRB) has ever made mining gold (which is to say nothing), and more than double the $13 million + $20 million in two far off milestone payments GL1 offered to settle the deal for the first 80% in December last year.
Even if you generously count those milestone payments as the equivalent of cash in hand, the uplift is, by our highly unskilled accounting fingers, around 7.2x.
(And in fact that deferred consideration is included in the new deal for the final fifth, which confuses things greatly, making the increase if the prices were extrapolated on a 100% basis more like 18x on our back of the hand scribbles.)
Granted, Manna is a more attractive project now that GL1 has been drilling there for almost a year.
It boasts a maiden resource of 9.9Mt at 1.14% Li2O and 49 Ta2O5ppm from just over 3500m of drilling, with programs already started for another 24,000m. But that is still a crazy uplift, signifying just how hot the market for lithium projects has become.
To fund the deal, drilling and a feasibility study on the Manna project, GL1 will raise $121.5 million in new equity at $2.25 (a 13.8% discount), including $100.2 million in an underwritten insto placement, which will also include a $19.6m issue to MinRes so the lithium and iron giant can top up its holding to 9.9%.
A placement of $11.1m will also be issued to Suzhou TA&A Ultra Clean Technology Co so it can maintain its 9.9% holding.
Retail investors will be able to mop up $10.1m in a share purchase plan.
Signalling the market interest in lithium these days, once this issue is complete GL1 will have raised over $150 million in capital not including its IPO last May.
In the past year its shares have risen 536.59%, valuing the explorer at almost $415m.
In that time lithium chemical prices have risen from under US$20,000/t to over US$70,000/t, while spot spodumene has gone from a bit over US$1000/t to more than US$7000/t according to some reporters.
Oh, and Pilbara Minerals, which in this context is like the chicken Huey prepared the day before so he can move onto a new Cooking Adventure, made $8.5 million a day in the last quarter.
Food for thought.
Materials stocks closed down 1.19% and energy was off more than 1.5% as investors deserted the resources stocks they backed so enthusiastically yesterday.
Iron ore futures dipped below US$90/t in Singapore, threatening to close below that level for the first time this year.
The big iron ore miners and diversified stocks were all in the red, with Fortescue (ASX:FMG) the worst off at a more than 3% fall.
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