‘Underpriced’ Alliance won’t go cheaply as lithium M&A hits the spotlight
Would WA lithium miner Alliance (ASX:A40) be open to a takeover deal à la Wesfarmers and Kidman if the price was right?
Ultimately, that’s a decision for the shareholders, Alliance boss Mark Calderwood says.
“The board’s going to have one view, but at the end of the day you’ll get a message from your shareholders if a deal is a good one for them,” Calderwood told Stockhead.
“We’ve been very under-priced. We’ve edged up in the last couple of days, which is good, but we’ve been the cheapest of all the producers.”
“And there’s not many good projects around — that’s the thing about lithium.”
In a more positive market, Alliance’s shareholders would be looking for a strong premium, Calderwood says.
“But it comes down to what mood they’re in on the given day,” he says.
“A month ago, people were down in the dumps about lithium stocks and could’ve been easy pickings. At the moment they’d probably be a bit harder to pick off.”
Either way, the $776m Wesfarmers offer has given the sector more mainstream credibility, says Calderwood.
“The market here didn’t seem to appreciate it when Albemarle paid $1.6 billion for half of Wodgina, but as soon as a group like Wesfarmers jumps in people’s ears prick up,” he says.
That’s what makes the Kidman offer interesting – the fact it didn’t come from a major lithium miner, downstream processor, battery manufacturer or EV maker like they usually do.
These companies now need to compete with large players, like Wesfarmers or Rio Tinto, who are simply looking to get involved in the lithium-ion supply chain. This could give new producers, like Alliance, some level of protection from low offers.
The miner is taking steps of its own to boost value. Bald Hill’s got a short mine life compared to some of the other WA hard rock producers, but a big 60,000m drilling program is underway to change all that. And Calderwood also said offtake discussions “with non-Chinese parties” for Bald Hill’s uncommitted tonnes were well advanced.
The market is looking for longevity, he says.
“People want to see us with a plus-20-year mine life, so it’s important for us to grow our resource,” he says.
“It’ll be reasonably busy in five years, but full-on in 10 years’ time — so we want to be here for the long term.”