Article by Brad Thompson, courtesy of the Australian Financial Review.
Gina Rinehart has landed her first big partnership in lithium by joining forces with Chilean giant Sociedad Quimica y Minera to launch a knockout $1.7 billion bid for explorer Azure Minerals.
Mrs Rinehart’s Hancock Prospecting and SQM have locked up more than 60 per cent of the stock after their improved 50-50 bid, pitched at $3.70 a share up from $3.52, won the support of at least two other major shareholders: billionaire prospector Mark Creasy and Delphi Group.
Chris Ellison’s Mineral Resources can opt to sell into the Rinehart-SQM takeover, or resist giving up what is currently a 13.5 per cent stake. Mr Ellison said in November that he wanted a big piece of Azure’s Andover project; MinRes declined to reveal its intentions on Tuesday.
The Hancock-SQM scheme of arrangement is contingent on no other player acquiring or increasing its holding in Azure to more than 15 per cent.
Mrs Rinehart’s team and SQM thrashed out the pact that delivers on part of her ambitions to become a major lithium player in her home state of Western Australia. The Andover project lies in the mineral-rich Pilbara region that is home to Mrs Rinehart’s iron ore empire.
Hancock chief executive Garry Korte said the private company was looking at a number of other early-stage lithium projects on top of its “powerful partnership” with SQM and compelling offer for Azure.
Hancock with 18.4 per cent and SQM with 19.4 per cent already control a combined 37.8 per cent of their target. They have formal commitments from Mr Creasy (12.8 per cent) and Delphi (10.2 per cent) to sell into the bid.
In backing the bid, Mr Creasy has anointed Hancock-SQM as his long-term partner in Andover.
The prospector behind discoveries that led to the Jundee gold mine and Nova nickel mine owns 40 per cent of Andover in his own right, with the remaining 60 per cent controlled by Azure.
Mrs Rinehart and Mr Ellison and their respective companies have a track record of collaboration in iron ore projects and stakes in a string of other lithium stocks, including Delta Lithium.
MinRes sold into a Hancock takeover bid for Atlas Iron in 2018 and Hancock’s successful bid for Warrego Energy last summer.
The battle for Andover kicked off on October 26 when the Azure board endorsed a $3.52-a-share offer from SQM.
The SQM bid came hot on the heels of Hancock forking out $1.3 billion for 19.9 per cent of Liontown Resources and foiling New York-listed Albemarle’s $6.6 billion deal.
SQM thought it had Rinehart-proofed its bid for Azure by building a plan B into the deal structure which would see the Chilean company pivot to
buying Azure shares on-market at $3.50 – now $3.65 – if the initial approach failed.
But within 24 hours, Hancock – careful not to trigger the 19 per cent threshold that would have allowed SQM to buy on-market – emerged with an 18.4 per cent stake and killed any hopes of a straightforward transaction.
Mrs Rinehart has made it clear Hancock is seeking partnerships in lithium that could bring project development and mining expertise to the table as well as capital.
The partnership with SQM, which is already developing a lithium mine and hydroxide plant in WA through a joint venture with Wesfarmers, represents a big step in delivering on that strategy.
Mr Korte said Hancock and SQM would combine their complementary skills across WA mining exploration, development, operations and processing for the long term.
“We are pleased to provide Azure shareholders with this compelling offer to receive substantial cash value for their shares despite weakening market conditions,” he said.
“With Hancock reviewing a number of early-stage lithium prospects, this offer continues Mrs Rinehart’s substantial support for the WA mining industry. As Mrs Rinehart says ‘when mining does well, so do Australians’.”
SQM chief executive Ricardo Ramos said his company would deploy its lithium expertise alongside Hancock’s “significant local mining knowledge and track record of project development” to manage the risks associated with early-stage exploration.
Azure stock was trading at $3.63 before the company went into a trading halt on Monday. The Hancock-SQM bid replicates the original SQM offer in that if the scheme is unsuccessful at $3.70, plan B is to buy on-market at $3.65.
MinRes, which owns the Wodgina lithium mine in the Pilbara in partnership with Albemarle, acquired most of its 13.5 per cent stake in Azure at well above the Hancock-SQM offer price.
Hancock’s involvement is expected to help SQM with any hurdles it may face gaining Foreign Investment Review Board approval.
SQM paid $20 million for its stake in Azure in March in a deal that included off-take rights to 25 per cent of any lithium produced from Andover or other projects.
The Hancock-SQM partnership was announced as SQM grabbed a strategic stake in lithium-nickel exploration tenements close to Andover via a $10 million deal with Novo Resources.
