Energy Storage

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>>> Gina Rinehart’s Hancock, SQM Agree to Buy Azure for $1.1 Billion


Bloomberg

by Sybilla Gross and Annie Lee

December 18, 2023


https://finance.yahoo.com/news/gina-rinehart-hancock-sqm-agree-224424596.html


(Bloomberg) -- Chilean lithium giant SQM has partnered with iron ore billionaire Gina Rinehart to make a sweetened A$1.7 billion ($1.1 billion) cash offer for Azure Minerals Ltd., ending two months of uncertainty over the deal after Australia’s richest woman crashed an earlier bid.

Rinehart’s Hancock Prospecting Pty. and Sociedad Quimica & Minera de Chile SA, as SQM is formally known, will offer A$3.70 for each share in the Perth-based miner, a proposal already recommended by Azure’s board, the two sides said on Tuesday. The offer represents a nearly 52% premium to the price before the previous proposal in October.

SQM had earlier offered A$3.52 per Azure share, under a similar scheme of arrangement structure — a 44% premium. But that bid was immediately thrown into question when Rinehart built a near-blocking 18% stake.

Mineral Resources Ltd., led by mining veteran Chris Ellison, followed by taking a 12% holding in Azure. His intentions are not yet clear.

At least two other major shareholders, Creasy Group and Delphi Group, have indicated that they intend to sell all of their shares to the joint bidders, handing SQM and Hancock another 23% to add to their collective 37.8%, and all but securing the bid. Creasy owns 40% of Azure’s promising Andover lithium project in West Australia.

Azure shares, however, gained as much as 2.2% in early trade Tuesday, rising to A$3.71, just above the improved offer — indicating at least some in the market are betting the lithium miner could yet attract more attention.

Rinehart’s credibility in developing bulk commodity businesses – as well as her political sway in and around the Pilbara — likely played into SQM’s willingness to partner with Hancock, said Jon Bishop, analyst at Jarden Securities.

“The alternative would’ve been Chris and Gina getting in the way of the deal and frustrating it,” Bishop said. “My view would be that SQM would look at all of those things on balance and say - well, we could go it alone as a foreigner, or we could have a situation where we can work with a party that probably makes development eminently easier.”

The lithium industry has seen a flurry of acquisition offers and deals over the past months, as the crucial role of the battery metal in the energy transition and optimistic expectations around long-term demand prompt producers and investors to bet on new sources of supply. Interest in small and mid-sized producers in Western Australia, one of the world’s most promising new lithium regions, has surged, even as prices for the metal are now at their lowest since 2021.

Rinehart added to the frenzy, stepping into a bid for Liontown Resources Ltd. and gradually building a 19.9% stake in the miner. That was enough to prompt top global producer Albemarle Corp. to withdraw its A$6.6 billion offer in October. The Australian target was left scrambling to find alternative funds for its flagship Kathleen Valley project.

“SQM brings downstream lithium chemical processing experience, while Hancock brings upstream hard rock mining experience, which in my view, makes the project more likely to reach production and successfully ramp up over time,” said Seth Goldstein, equity strategist at Morningstar Research Services LLC.

The outlook for the battery material isn’t expected to improve any time soon, as a wave of new production comes online and slower growth in electric vehicle sales in China creates oversupply in the short term, raising questions over whether some deals in the sector are too expensive.

But the current deal gives Rinehart, who has built an iron ore empire, a stake in a metal feeding the energy transition. SQM, meanwhile, gains supply outside of Chile, where the company’s current operating contract expires in 2030.

The revised deal does not contain any minimum acceptance conditions, though the takeover is contingent on more than 50% of all shareholders voting in favor of the joint bid.

If the scheme of arrangement structure is not successful, SQM and Hancock have also proposed an off-market takeover offer for a cash amount of A$3.65 per Azure share.

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