Pilbara Minerals’ $247m bid for Altura project could spark lithium M&A
Link copied to
Lithium producers have been under pressure as prices for the battery material have halved to $US9 per kilogram for delivery to China, Korea and Japan from $US20/kg in January 2019, according to London Metal Exchange data.
Altura Mining’s receivers KordaMentha, appointed this week, said in a notice to the ASX Thursday they were not party to the deal between Altura’s lenders in the form of loan noteholders and Pilbara Minerals.
“The implementation agreement provides Pilbara Minerals with a mechanism to potentially acquire the Altura lithium project through the purchase of shares in ALO for approximately $US175m, subject to completion of the receivership process,” said KordaMentha.
Altura Lithium Operations (ALO) is a 100 per cent-owned subsidiary of Altura Mining that owns and operates its Altura lithium project located to the west of Pilbara Minerals’ Pilgangoora lithium-tantalum mine.
Pilbara Minerals has offered an up-front payment of $US155m for the Altura lithium project funded through a future equity raising for $240m which is supported by Australian Super and Resource Capital Fund.
“The potential acquisition represents a logical consolidation of two neighbouring operations to unite the greater Pilgangoora orebody, unlocking tangible synergies in both the short and long term,” said Pilbara Minerals managing director, Ken Brinsden.
“If successful, the acquisition will cement Pilbara Minerals’ position as the largest pure-play ASX-listed lithium company by enterprise value and will provide strong leverage to the expected recovery in lithium prices, driven by the increasing demand for electric vehicles and energy storage applications evident across the world,” he added.
Pilbara Minerals shipped 116,000 dry metric tonnes of spodumene concentrate in the 2020 financial year and had $86.3m of cash on its balance sheet at June 2020.
The Altura project had reached commercial levels of production in the September quarter of around 43,000 to 45,000 wet metric tonnes of spodumene concentrate.
Four shipments totaling 48,000 dmt of Altura spodumene had been sold to long-term offtake partners, said the company in an update last month.
The asset was listed in a government prospectus last week for investors seeking to put funds into Australian minerals projects.
The Altura lithium project is being placed into care and maintenance by its receivers to preserve cashflow.
KordaMentha, as Altura Mining’s receiver, has a legal duty to ensure its creditors receive the best price for the defunct company’s assets, and other companies are believed to be interested in acquiring the Altura lithium project.
The receivers said Pilbara Minerals is entitled to match any competing proposal offered for the Altura project, and it added a break fee is payable if the receiver accepts a competing proposal.
“While it is pleasing to see such strong interest in the Altura project, the receivers and the group remain committed to the sale and recapitalisation process,” said KordaMentha.
The potential acquisition of the Altura project by Pilbara Minerals is subject to a number of conditions, including approval from other creditors, it noted.
“We ask that all interested parties contact the receivers to express their interest in participating in the sales process [for the Altura lithium project] which is due to commence this week,” said KordaMentha.
Pilbara Minerals’ offer of $US175m for the Altura lithium project effectively sets a floor price for the asset.
The loan noteholders are believed to be owed $US180m by Altura Mining, and other company creditors are owed $US35m including several million dollars to employees.
KordaMentha was appointed as receivers to Altura Mining by the company’s first ranking secured creditor, BNY Trust Company of Australia as trustee of Pilgangoora Security Trust.
Investors will turn to other lithium companies to see how they respond to Pilbara Minerals’ move for Altura’s lithium project and whether it triggers any industry consolidation, according to lithium industry analysts.
“Spodumene mergers and acquisitions make complete sense and begin to simplify the lithium rush of 2016 into fewer but bigger producers,” said Benchmark Mineral Intelligence, managing director, Simon Moores.
He said the potential Altura deal “sets Pilbara Minerals on the path to become the world’s dominant lithium producer”.
“The way the spodumene market plays out in the next 18 months will define the next 10 years, next growth cycle,” said Moores.
Possible candidates for involvement in a shake-up of Australia’s lithium sector could include such companies as Galaxy Resources (ASX:GXY) with its Mt Cattlin spodumene project near Ravensthorpe in WA,
Another larger player in the sector is US company Albemarle with its 49 per cent stake in Greenbushes lithium ore mine operator Talison Lithium, and its 60 per cent interest in Mineral Resources’ (ASX:MIN) Wodgina lithium mine, both in WA.