Article by Nick Evans courtesy of the Australian.
Gina Rinehart’s Hancock Prospecting has secured a potential long-term development partner for the company’s West Australian lithium assets after teaming up with global lithium giant SQM in a $1.7bn joint takeover of Azure Minerals.
Hancock and SQM will jointly bid for Azure through a newly registered company, SH Mining – half-owned by Chile’s SQM and half by Hancock subsidiary Hanrine Future Metals, with Mrs Rinehart installing trusted lieutenants Jay Newby and Tad Watroba on its board to oversee the joint venture.
The establishment of a joint venture company suggests the joint bid for Azure is a prelude to a broader long-term partnership with SQM over Mrs Rinehart’s WA lithium ambitions, with the bid structure also designed to dampen possible tensions with WA mining’s other two billionaires, Mark Creasy and Chris Ellison.
The joint takeover will lift the bid price to $3.70 a share in cash if holders vote in favour of the deal at a scheme meeting, with a $3.65 a share fallback price if the scheme is blocked and falls back to an on-market takeover.
The price is a significant improvement on SQM’s previous offer for Azure, priced at $3.52 through a successful scheme meeting or $3.50 in an on-market takeover if shareholders voted against the deal.
Hancock’s decision to buy Azure shares, along with a parallel move by MinRes, effectively stymied any chance of SQM taking sole control of Azure, however.
The complex deal essentially ensures that both Mrs Rinehart and legendary prospector Mark Creasy get a foothold in lithium production while gaining the global experience of Chile’s SQM as a major partner.
The revised deal also represents a workaround in the five-way tussle for control of the company, with Creasy Group and Germany’s Delphi agreeing to back the transaction – effectively locking up more than 60 per cent of Azure stock into backing their offer.
Mr Creasy also owns 40 per cent of Azure’s Andover deposit.
More than 70 per cent of Azure shares are held by only five groups – Hancock and SQM hold 37.8 per cent, Creasy Group 12.8 per cent, Delphi 10.2 per cent and Chris Ellison’s Mineral Resources 13.5 per cent.
Each party holds a blocking stake that would prevent a complete takeover of Azure, and any combination of two shareholders could almost certainly stop a proposed buyer reaching the 75 per cent threshold needed at an ordinary scheme meeting.
Instead, the deal is structured to allow Hancock and SQM to jointly move to take control of Azure even if MinRes wants to retain its position as a minority shareholder, and not sell out of the company.
Rather than a traditional scheme meeting, at which the takeover is approved or rejected, shareholders will first vote on whether to allow Hancock and SQM to join their shareholdings together for the purposes of the takeover, according to documents released to the market on Tuesday. That would require a majority of shares voted on the day, excluding those held by Hancock and SQM. Only then would a scheme vote be held.
If that vote did not succeed – a possibility if MinRes were to vote against it – the takeover would revert to a traditional on-market play at $3.65, allowing MinRes to stay out of the deal and remain a minority holder. MinRes has not yet indicated its views on the new SQM and Hancock offer.
Hancock chief executive Garry Korte said Hancock and SQM would take a “long term approach to project development” on Azure’s Andover lithium deposit.
“This powerful partnership brings together the complementary skills of our respective companies across West Australian mining exploration, development, operation and processing for the long term,” he said. “We are pleased to provide Azure shareholders with this compelling offer to receive substantial cash value for their shares despite weakening market conditions.”
SQM CEO Ricardo Ramos said the company looked forward to working with Hancock.
“SQM is pleased with the progress Azure’s management team have made in understanding the potential of Andover through exploration drilling. Moving forward, SQM will look to deploy its lithium expertise alongside Hancock’s significant local mining knowledge and track record of project development to manage the elevated risk profile associated with early-stage exploration projects,” he said.
Azure shares closed up 6c at $3.69 on Tuesday.
