As a result of some of the top producers of the battery material in the world as well as other interested parties vying for supplies, emerging Australian lithium companies are seeing an increase in buyouts.
Companies like Albemarle Corp, the world's largest lithium producer, have been searching for acquisitions in Australia, which produces the most lithium globally and has more than 80 lithium-related companies listed on its main stock exchange. This search has been motivated by falling lithium prices as well as Chile, a major producer, nationalising the industry earlier this year.
Although proposals have been rejected based on the promise of surging demand from sales of electric vehicles and the lithium-loaded batteries that power them, they are hesitant to pay up for listed producers whose market valuations have skyrocketed as a result of growing pricing.
According to bankers, solicitors and mining analysts, this is causing acquirers to refocus their search on earlier stage lithium developers, including some who are drilling to estimate reserves. Many of these businesses are less expensive and desperate for funding as they increase their activity.
"It seems like the cheapest way to get lithium units is via the drill bit," said analyst Kaan Peker of RBC in Sydney.
"We'll see a lot of the exploration companies looking to increase their resources and reserves, so that usually puts them front of mind with the producers which are cashed up. So I think there's going to be some opportunistic acquisitions."
There is already proof that pre-producing corporations are engaged in frenetic transaction activity. Earlier this month, Develop Global, a base metals explorer backed by Mineral Resources, a diversified miner, proposed to buy lithium developer Essential Metals for A$152.6 million ($97.98 million). By 2025, Essential Metals hopes to ship ore.
The second-largest producer of lithium in the world, SQM of Chile, launched an offer for Azure Minerals last month after acquiring a 19.5% share in the company in March for A$20 million.
The offer was rejected, according to Azure, which is developing the Andover lithium project and hopes to start production by 2030.
Albemarle's $3.7 billion offer to purchase Liontown Resources earlier in 2023 before it began producing the material that year was also turned down.
The deals frenzy coincides with Australia's implementation of a crucial minerals strategy that calls for major partnerships with investors and foreign partners in order to develop into a superpower in the field of renewable energy.
According to the Australian think-tank Climate Capital Forum, the nation, which provides about half of the world's lithium, requires A$100 billion in strategic national interest capital to draw A$200 billion to A$300 billion in private investment to transform the nation into a sustainable energy powerhouse.
WoodMackenzie Consulting anticipates a five-fold increase in global demand for EV battery materials by 2030.
"Even though battery chemistry is evolving and impacting certain metals, lithium is a mainstay and the demand story remains robust. The battery metals landscape, and lithium in particular, looks poised for further M&A activity,” said Gavi Friedland, head of metals and mining at Goldman Sachs in Australia & New Zealand.
Companies increasing their activity along the value chain are another factor driving industry consolidation.
While Albemarle is increasing production at its Kemerton hydroxide plant and SQM is also building a lithium hydroxide plant, Mineral Resources is evaluating whether to construct an Australian lithium battery chemical factory.
"Downstream facilities need product, so that continues to drive M&A," said Guy Alexander, head of M&A at law firm Allens.
Prior to a supply gap that would deepen starting around 2030, buyers want to put pressure on supply early, he said.
"I think there's still going to be more in this for the next couple of years."
Tactical buyers from significant auto-producing nations may also ramp up their M&A transactions.
In June, the Japanese company Idemitsu (5019.T) increased its ownership position in Delta Lithium to 15%. Later this year, Delta intends to begin mining at its Mt. Ida lithium project.
“The inbound investment trend will continue,” said Tony Chong, a partner at law firm Squire Patton Boggs in Perth, adding that he expected to see more Japanese interest in Australian projects.
National security considerations, however, may limit China's interest in key minerals, since Australia has been outspoken in favouring investment from its friends and blocked the purchase of the Bald Hill lithium mine by a group with ties to China last month.
Canadian projects are becoming increasingly competitive with Australian ones for potential investors, in part due to Canada's closeness to the United States, the second-largest auto market in the world.
According to CEO Jakob Stausholm earlier this month, Rio Tinto is considering "a number of possible lithium opportunities" in a "pretty hot market," but any purchases require restraint.
According to Stausholm, the second-largest miner in the world would welcome a lithium asset in Canada.
Additionally, Patriot Metals' Corvette project in Quebec, which Albemarle acquired a 5% stake in this month, is not anticipated to begin production until the end of the decade.
However, Australians are not very concerned.
"I guess Canada as a region,...is probably not as quick as Australia in terms of approvals and development timelines," Dale Henderson, CEO of independent lithium miner Pilbara Minerals (PLS.AX) whose market capitalisation has zoomed to A$14.5 billion now from around A$40 million in early 2020, told Reuters last month.
"I also see moves afoot to try to accelerate that. It will be interesting to see how that (industry) develops."
(Source:www.newswav.com)
Companies like Albemarle Corp, the world's largest lithium producer, have been searching for acquisitions in Australia, which produces the most lithium globally and has more than 80 lithium-related companies listed on its main stock exchange. This search has been motivated by falling lithium prices as well as Chile, a major producer, nationalising the industry earlier this year.
Although proposals have been rejected based on the promise of surging demand from sales of electric vehicles and the lithium-loaded batteries that power them, they are hesitant to pay up for listed producers whose market valuations have skyrocketed as a result of growing pricing.
According to bankers, solicitors and mining analysts, this is causing acquirers to refocus their search on earlier stage lithium developers, including some who are drilling to estimate reserves. Many of these businesses are less expensive and desperate for funding as they increase their activity.
"It seems like the cheapest way to get lithium units is via the drill bit," said analyst Kaan Peker of RBC in Sydney.
"We'll see a lot of the exploration companies looking to increase their resources and reserves, so that usually puts them front of mind with the producers which are cashed up. So I think there's going to be some opportunistic acquisitions."
There is already proof that pre-producing corporations are engaged in frenetic transaction activity. Earlier this month, Develop Global, a base metals explorer backed by Mineral Resources, a diversified miner, proposed to buy lithium developer Essential Metals for A$152.6 million ($97.98 million). By 2025, Essential Metals hopes to ship ore.
The second-largest producer of lithium in the world, SQM of Chile, launched an offer for Azure Minerals last month after acquiring a 19.5% share in the company in March for A$20 million.
The offer was rejected, according to Azure, which is developing the Andover lithium project and hopes to start production by 2030.
Albemarle's $3.7 billion offer to purchase Liontown Resources earlier in 2023 before it began producing the material that year was also turned down.
The deals frenzy coincides with Australia's implementation of a crucial minerals strategy that calls for major partnerships with investors and foreign partners in order to develop into a superpower in the field of renewable energy.
According to the Australian think-tank Climate Capital Forum, the nation, which provides about half of the world's lithium, requires A$100 billion in strategic national interest capital to draw A$200 billion to A$300 billion in private investment to transform the nation into a sustainable energy powerhouse.
WoodMackenzie Consulting anticipates a five-fold increase in global demand for EV battery materials by 2030.
"Even though battery chemistry is evolving and impacting certain metals, lithium is a mainstay and the demand story remains robust. The battery metals landscape, and lithium in particular, looks poised for further M&A activity,” said Gavi Friedland, head of metals and mining at Goldman Sachs in Australia & New Zealand.
Companies increasing their activity along the value chain are another factor driving industry consolidation.
While Albemarle is increasing production at its Kemerton hydroxide plant and SQM is also building a lithium hydroxide plant, Mineral Resources is evaluating whether to construct an Australian lithium battery chemical factory.
"Downstream facilities need product, so that continues to drive M&A," said Guy Alexander, head of M&A at law firm Allens.
Prior to a supply gap that would deepen starting around 2030, buyers want to put pressure on supply early, he said.
"I think there's still going to be more in this for the next couple of years."
Tactical buyers from significant auto-producing nations may also ramp up their M&A transactions.
In June, the Japanese company Idemitsu (5019.T) increased its ownership position in Delta Lithium to 15%. Later this year, Delta intends to begin mining at its Mt. Ida lithium project.
“The inbound investment trend will continue,” said Tony Chong, a partner at law firm Squire Patton Boggs in Perth, adding that he expected to see more Japanese interest in Australian projects.
National security considerations, however, may limit China's interest in key minerals, since Australia has been outspoken in favouring investment from its friends and blocked the purchase of the Bald Hill lithium mine by a group with ties to China last month.
Canadian projects are becoming increasingly competitive with Australian ones for potential investors, in part due to Canada's closeness to the United States, the second-largest auto market in the world.
According to CEO Jakob Stausholm earlier this month, Rio Tinto is considering "a number of possible lithium opportunities" in a "pretty hot market," but any purchases require restraint.
According to Stausholm, the second-largest miner in the world would welcome a lithium asset in Canada.
Additionally, Patriot Metals' Corvette project in Quebec, which Albemarle acquired a 5% stake in this month, is not anticipated to begin production until the end of the decade.
However, Australians are not very concerned.
"I guess Canada as a region,...is probably not as quick as Australia in terms of approvals and development timelines," Dale Henderson, CEO of independent lithium miner Pilbara Minerals (PLS.AX) whose market capitalisation has zoomed to A$14.5 billion now from around A$40 million in early 2020, told Reuters last month.
"I also see moves afoot to try to accelerate that. It will be interesting to see how that (industry) develops."
(Source:www.newswav.com)