Purchasing an 18% share in Azure Minerals, Rinehart blocks the takeover by SQM

Australia’s wealthiest woman, Gina Rinehart, announced on Friday that Hancock Prospecting, a strategic move intended to counter the A$1.63 billion ($1 billion) proposal from Chilean lithium giant SQM (NYSE: SQM) for the junior, had purchased 18% of Azure Minerals (ASX: AZS).

The shareholding might be sufficient to contest the current offer because it is barely above the 20% threshold that would necessitate a mandated takeover offer.

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Paul Howard of Canaccord told Reuters, “(Whether) this suggests Hancock just wants to partner or is gearing up for more, remains to be seen.” “SQM may have anticipated this, which is why it included the takeover as a backup in the agreement.”

It happens less than two weeks after Rinehart steadily increased her 19.9% blocking position in the Western Australia-based miner to impede Albemarle’s (NYSE: ALB) plan to acquire Liontown Resources (ASX: LTR).

The Pilbara’s Andover lithium and nickel-copper-cobalt project is being developed by Azure, whose shares are now trading at a premium of over fifteen times what it was at the end of 2022. They closed at A$3.50 on Friday after rising as much as 44% to A$3.52, their best price since June 2008.

News of “exceptional” drilling findings at Andover in June, which Hancock described as “encouraging” on Friday, helped to increase the stock’s valuation. However, the iron ore miner pointed out that estimating a mineral resource and assessing its potential needed additional investigation.

“While Andover exhibits promising qualities, it has a long path and significant risks to navigate before its ultimate potential is known,” Hancock said, “consistent with early stage projects that are pre-resource.”

Azure declared on Thursday that it and SQM had finalized an implementation agreement. A conditional off-market takeover bid at A$3.50 will be launched by the Chilean lithium giant in the event that the two-layered acquisition proposal, which includes a scheme of arrangement priced at A$3.52 per share, fails.

If a single shareholder acquires more than 19% of the target miner, SQM may withdraw its offer in accordance with the conditions of the primary offer structure.

Rinehart’s entry into the lithium industry demonstrates her awareness of how the market for iron ore, her primary source of income, is evolving.

The commodity is still profitable even though China’s demand is slowing down; Roy Hill Holdings, owned by Hancock, recorded A$3.3 billion in operating cash flow for the year ending in June earlier on Friday, the majority of which was distributed as dividends.

Wave of Lithium transactions
SQM has been diversifying its holdings outside of Chile in order to maintain its top spot in the rapidly developing battery metals market.

Mergers and acquisitions, in the opinion of SQM and other leading lithium producers, are a more efficient means of increasing capacity than developing brand-new greenfield projects.

Due to a drop in their prices, several lithium producers are now attractive opportunities for investors looking to get into the clean energy and electric vehicle supply chain markets.

In just a few days, SQM’s bid for Azure would be the miner’s second foray into Australia’s lithium market if it is successful. The business declared on Monday that it had acquired a 30% share in junior explorer Pirra Lithium and that it would eventually raise its ownership to 40% by contributing A$3 million ($1.9 million) to finance further research.

In addition, SQM and Wesfarmers own a 50/50 stake in the Mt. Holland lithium project, which is anticipated to begin operations in the second half of 2024 and yield up to 50,000 tonnes of lithium hydroxide annually.

Other recent corporate actions in Australia include modest farm-ins with businesses like Kalamazoo Resources and Dart Mining throughout the nation, as well as an earn-in agreement with Tambourah Metals (ASX: TMB) covering the explorer’s Julimar North project in Western Australia.

Author: utdinfo_2ye1ln

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