Lithium duo in $700m merger
Peter Klinger - The West Australian on May 27, 2016, 2:41 am
Lithium duo in $700m merger
Galaxy and General Mining are joint owners of Mt Cattlin spodumene mine.
The lithium boom is set to enter a new phase with expectations the joint owners of the Mt Cattlin spodumene mine near Ravensthorpe are finalising a $700 million merger.
It will become the first big-ticket corporate deal in the WA lithium space as players start taking advantage of soaring share prices driven by investors excited by the Tesla electric car frenzy. The $513 million-valued Galaxy Resources and its $191 million partner General Mining called a trading halt of their shares yesterday pending news of a tie-up, which analysts expect to be consummated through a scrip-based takeover of GM by Galaxy to be announced early next week.
It will confirm the remarkable turnaround of Mt Cattlin’s fortunes and the impeccable timing of the Michael Fotios-run GM.
GM only formalised an earn-in deal with Galaxy in September, agreeing to fund the restart of a spodumene operation that had been mothballed in 2012 by its then financially troubled owner. In return, GM would own 50 per cent of Mt Cattlin.
Neither company is talking.
But a merger would put the enlarged Galaxy ahead of the $658 million Pilbara Metals, which is developing the Pilgangoora lithium-tantalite project near Port Hedland, atop the list of WA lithium players.
GM’s shares have soared from below 10¢ since the Mt Cattlin farm-in was announced. The farm-in is GM’s only significant asset but such is the investor excitement around lithium — spodumene is a pyroxene mineral consisting of lithium aluminium inosilicate — that its stock was worth 61.5¢ yesterday. Factoring in a takeover premium but also GM’s sharp rise, Galaxy may bid between 70¢ and 80¢ a share for its Mt Cattlin partner.
Galaxy was WA’s original lithium poster child when, under the leadership of Iggy Tan, it developed Mt Cattlin and a Chinese lithium carbonate plant to process the spodumene before almost collapsing amid operational and cash flow woes.
Galaxy’s rebirth was underpinned by the farm-in with GM, not expecting the speed of a second and bigger lithium boom.
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