Australia's Hancock Prospecting has built up an 18.3pc stake in Australian lithium firm Azure Minerals, close to a level that will thwart Chilean lithium producer SQM's scheme of arrangement acquisition offer to buy the company outright.
"Hancock's investment focus is long term," it said on 27 October after the purchase. Hancock is owned by iron ore magnate Gina Rinehart, which also built up a 19.9pc stake in Australian lithium firm Liontown that saw US-based lithium firm Albemarle back off on its acquisition. Building up a 19pc stake can typically make or break a scheme of arrangement deal.
Azure Minerals on 26 October had entered into a binding agreement for SQM Australia to wholly acquire Azure through a scheme of arrangement at A$3.52/share ($2.24/share) in cash for a total of around A$1.63bn. The price is at a premium of 52.4pc to SQM's previous proposed offer of A$2.31/share announced on 15 August.
The acquisition is aligned with SQM's strategy of adding value to new projects, said SQM's chief executive Ricardo Ramos. SQM is aiming to achieve a production capacity of 210,000 t/yr of lithium carbonate and 100,000 t/yr of lithium hydroxide in Chile along with another 30,000 t/yr of lithium hydroxide in China.
Conditions of the deal include obtaining approval from Australia's Foreign Investment Review Board and no shareholder, except SQM, to have acquired greater than a 19pc interest in Azure. The proposal also includes a simultaneous conditional off-market takeover offer at A$3.50/share in cash if the scheme of arrangement failed. Both the clauses have likely been added in to act as fail-safe mechanisms after Albemarle's Liontown deal fell through.
Azure's board of directors on 26 October unanimously recommended its shareholders to vote in favour of the scheme in the absence of a superior proposal and if the scheme failed, to accept the off-market take offer. All the board members intend to do the same, said Azure. The transaction is an opportunity for its shareholders to realise "certain value" given "significant time, cost and risk" associated with its Andover lithium project given "an uncertain broader economic outlook", said the firm's managing director Tony Rovira.
One of its major shareholders, Delphi Group, which owns 10.44pc of Azure as at 26 October, intends to vote in favour of the scheme either directly or indirectly if no superior proposal emerges, Azure added. Azure's shareholders are expected to vote on the deal in late January or early February next year.
Azure controls 60pc of the Andover lithium project located in Western Australia's West Pilbara region, with the remaining 40pc owned by Creasy Group, in turn owned by Australian minerals prospector billionaire Mark Creasy. Its first mineral resource estimate is expected to be published in January-March 2024, with an exploration target currently putting the project's deposit at 100-240mn t of 1-1.5pc grade lithium oxide.
