IGO hunting that essential acquisition

Company News

by Glenn Dyer

Australian miner IGO Ltd and its Chinese partner Tanqui have made a well-timed bid for the smaller lithium aspirant Essential Metals at a likely cost of around $A136 million.

The bid’s logic is clearly to see, IGO and Tanqui are shareholders in the Greenbushes lithium mining operation and hydroxide refinery now under construction and want the reassurance of access to more reserves of spodumene, even though Greenbushes is the largest lithium mine in the world.

And Essential has that with, as IGO points out, one of just 14 lithium projects in Australia with a confirmed resource based as measured by ASX standards.

The bid is at 50 cents cash for each Essential shares, a 45% premium to Essential’s share price last Friday.

The news saw Essential shares leap 40% to 48 cents at Monday’s close, below the offer price and a sign that investors don’t see any rivals as yet. IGO shares rose a more sedate 1.1% to $14.17.

The bid is being made through Tianqi Lithium Energy Australia (TLEA). TLEA is an incorporated joint venture owned 51% by Tianqi Lithium Corporation and 49% by IGO Limited.

TLEA owns an integrated lithium business, including a 51% interest in the Greenbushes Lithium Operation (Albemarle Corp of the US has 49%) and 100% of the Kwinana Lithium Hydroxide Refinery. Both are in Western Australia.

Essential’s directors have unanimously recommended shareholders vote in favour of the bid in the absence of a superior offer.

The transaction is subject to a number of regulatory clearances, including approval from Australia’s Foreign Investment Review Board (FIRB).

The deal was announced at a time when companies are racing to capitalise on booming prices and demand of lithium, a key component of electric vehicle batteries, amid a global push to reduce carbon emissions.

Essential’s portfolio includes the Pioneer Dome Project, located about 130 kilometres south of Kalgoorlie. The project covers an area of 450 kilometres and is in close proximity to the Mount Marion and Bald Hill lithium projects.

“Pioneer Dome is one of only 14 JORC compliant spodumene lithium resources in Australia, with a defined JORC resource of 11.2 million tonnes @ 1.16% Li2O. Essential also holds several other interests in early-stage exploration projects across lithium, nickel and gold.

“The ESS transaction provides an opportunity to accelerate lithium exploration to bring new resources to production,” Matt Dusci, IGO’s acting CEO said in Monday’s statement to the ASX.

The proximity to the Mount Marion mine owned by Mineral Resources (MinRes) would normally spark speculation that that that company and its aggressive CEO, Chris Ellison might want to make a counter bid for Essential.

But Ellison and MinRes have involved themselves in the sprawling battle for control of the gas supplies in the Perth Basin in apparent competition to Gina Rinehart (whose company is a shareholder in MinRes).

MinRes reportedly grabbed a 15% stake of Warrego at 35 cents a share and Ms Rinehart’s company lifted its offer for Warrego to 36 cents a share from 28 cents (which was set Ms Rinehart’s company overbid Kerry Stokes’ Beach Energy.

Warrego’s 50% partner in a key undeveloped West Erregulla gas field, Strike Energy, is also deeply involved in the battle.

MinRes has bid $403 million for Norwest Energy which also has interests in the Perth Basin gas fields.

Because MinRes’ attention has been diverted by the Warrego and Norwest players, IGO and Tanqui might just get to snap up Essential Metals on the cheap.

Another deal in Australia’s electric battery metals industry was revealed yesterday with the US/European car maker Stellantis signing an agreement to buy manganese sulphate from ASX-listed Element 25.

Stellantis was created from the merger of Fiat Chrysler and Peugeot maker PSA, will also invest $US30 million in two tranches into Element 25, which is developing the Butcherbird manganese mine in WA with plans to process it at a manufacturing facility in the United States that wants to build by 2026.

That factory will have to be built otherwise the Stellantis deal will not happen.

The offtake deal with Stellantis calls for the supply of 45,000 tonnes of battery-grade high-purity, manganese sulphate monohydrate (HPMSM) from the proposed US-based processing facility over five years.

“Stellantis’ support for Element 25’s high purity battery-grade manganese sulphate project is a fantastic endorsement by one of the world’s largest automakers and supports our plans to become a globally significant long-term supplier of battery materials to meet growing global demand,” Element 25 CEO Justin Brown said in a statement.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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