Predator and Prey: South America is boosting its lithium profile and these ASX stocks are attracting M&A interest
Merger and acquisition (M&A) activity can be a huge value creator for shareholders, especially for those invested in the target firm. This column examines mining’s biggest corporate power plays and some of the ASX explorers ripe for consolidation.
As many of you may have heard – or perhaps experienced – online dating can be hit and miss; with fake profiles, wrongful representations of character, or even people pretending they’re 10 years younger than they actually are to get their proverbial bits in the door.
These are similar to issues that mining majors (and investors) have to deal with when deciding when to swipe right on companies with highly prospective mining projects.
Yet fear-thee-not intrepid speculators.
While we Stockheads aren’t the absolute experts in love, we do know a thing or 100 about lithium exploration – and this time we’re flying to South America to put a spotlight on who’s looking to partner up with whom as we showcase a few eligible young bachelor/bachelorettes with a lot to offer.
High-interest periods, like we’re in now, tend to mean bigger fish in the mining sector start swimming around the juniors because they’re the only ones with the financial clout to get things up and running without nuking themselves into unsolvable debt.
M&A’s can sometimes be a fickle mistress – there’s lots of back and forth going on as companies across the globe look to seize the most lucrative early doors projects they can get their hands on.
For instance, in July, Azure Minerals (ASX:AZS) which owns the potentially giant Andover lithium project in WA’s Pilbara recently rejected an upgraded US$900m bid from Chile’s SQM – the company’s largest shareholder which already owns an almost 20% stake.
Since then, it’s had other majors such as Chris Ellison’s Mineral Resources (ASX:MIN) and Gina Rinehart’s Hancock Prospecting snapping up positions in the company’s share register, among others, to block any further takeover action.
“After a recent buying spree Hancock holds 18.9% of the 60% of the Andover discovery in WA’s Pilbara, with MinRes sitting at 13.6%. That has made Chilean giant SQM’s hopes of acquiring the explorer, in Ellison’s words, ‘dead in the water’,” Stockhead’s mining guru Josh Chiat writes.
“A host of major players hold significant stakes, with SQM sitting at a touch under 20%. Billionaire prospector Mark Creasy owns the other 40% of Andover and 13.2% of AZS, while German investor Wilhelm Zours and his Delphi Group hold more than 10% as well.”
It’s a perfect example of just how much interest there is in lithium at the moment.
And if that’s not enough, that continuing soap opera follows the recent collapse of Albemarle’s offer to acquire Liontown Resources (ASX:LTR) in a purported $6bn deal.
SQM is persistent though, as it’s also been making smaller investments in early-stage lithium miners.
It recently agreed to buy a minority stake in Pirra Lithium and is financing exploration activities for Dart Mining in return for equity interest.
In addition, Chile’s state-owned Codelco announced recently it will acquire Lithium Power International (ASX:LPI) in a deal worth $244m, — at a whopping 136% premium to its 30-day volume weighted average price and develop a lithium mine in Chile’s Maricunga salt flat.
Other mining majors such as Lithium Americas, Allkem (ASX:AKE) and Livent are all in the process of boosting production in Argentina, and ASX juniors with highly prospective projects are on their radar.
Just look at the number of projects in development in Latin America at the moment:
Albiceleste is still on a high from winning the World Cup last year and the nation has just elected its new pro-mining President Javier Milei – the latter of which is an important outcome for its resources sector.
On his way to being elected, Milei touted reforms to the sector that include capital controls, the consolidation of exchange rates and a reduction of export taxes – all of which are highly attractive to foreign investment.
Small cap explorers are already in the country proving up deposits of Li and ASX-listed juniors such as Galan Lithium (ASX:GLN), Argosy Minerals (ASX:AGY) and Power Minerals (ASX:PNN) which are all in advanced stages of lithium brine projects in Argentina’s slice of South America’s lithium triangle.
It’s big news lately for GLN, as just days ago global mining behemoth Glencore swanned in to purchase 100% of the company’s Phase 1 production from its Hombre-Muerto West (HMW) project for up to $100m of prepay finance.
HMW is located on the Hombre Muerto Salar, sitting alongside many high-grade lithium brine deposits such as Livent’s El Fenix, Allkem’s Sal de Vida and POSCO’s Sal de Oro lithium operations.
Meanwhile, AGY is garnering interest for its flagship Rincon lithium-brine project, where a 2,000tpa lithium plant is being commissioned.
Rincon currently has a resource of 245,120t contained lithium carbonate and exploration upside could see that double in the near future, with the company actively looking to hook up with partners to expand output to 10,000tpa.
“Significant progress is being made with the pre-development works for the 10,000tpa operation expansion and I look forward to announcing our resource expansion upgrade soon,” AGY Zerko Zuvela says.
“These milestones will support the company’s ambitions and near-term growth phase to fully develop Rincon.”
PNN says a recent preliminary economic assessment of its flagship Rincon salar, part of its five-salar Salta project in the same region, can deliver a robust, low-cost 7,000tpa lithium carbonate equivalent (LCE) operation with US$194.8m annual revenue over an initial 14-year operation.
This is calculated are based on its existing resource of 292,564t LCE – which the explorer has already flagged as having strong potential for expansion.
It’s undertaking further exploration work while also moving to commence a preliminary feasibility study for the project.
Across to Brazil and Latin Resources (ASX:LRS) is focusing on the development of its hard rock Salinas project in Minas Gerais’ up-and-coming lithium district.
The explorer has been focused on a major 65,000m drill program to increase the footprint of the Colina deposit in preparation to update its resource.
It’s got 10 drill rigs on the go in its effort for Colina to become a Tier-1 operation, which LRS believes could establish it as one of the largest in South America.
LRS is also seriously doubling down on drilling after recently raising $35m for its 2024 campaign – and a definitive feasibility study is pegged for early next year – and is one to watch.
At Stockhead, we tell it like it is. While Galan Lithium, Power Minerals, Latin Resources and Argosy Minerals are Stockhead advertisers, they did not sponsor this article.