Source: Brokerage China Author: Zhao Mengqiao Time: 2021-10-11
Everything can be cut into new energy!
A few days ago, Zijin Mining and Canadian lithium salt company Neo Lithium reached a tender offer agreement. Zijin Mining intends to acquire all the outstanding shares of Neo Lithium at 6.50 Canadian dollars per share, with a total consideration of approximately 960 million Canadian dollars (approximately 4.96 billion yuan). It is understood that the core asset of the lithium salt company is the “3Q” lithium brine project in Argentina. The salt lake included in the project is currently the world‘s third-highest grade salt lake brine lithium extraction project, and the scale can also rank seventh. After Lithium made a series of process adjustments, the salt lake has been able to produce battery-grade lithium carbonate with a purity of 99.89%.
It is worth noting that this transaction may make CATL the biggest winner. CATL purchased 8% of Neo Lithium at a price of RMB 44 million as early as September last year and became its third largest shareholder. In the past year or so, the company’s share price has increased by more than five times its acquisition cost, and the acquisition price of Zijin Mining is 673.8% more expensive than the acquisition cost of the Ningde era.
Zijin Mining enters the lithium industry with 5 billion yuan
Canadian lithium salt company Neo Lithium disclosed an announcement on October 9th that Zijin Mining has agreed to acquire all the outstanding shares of Neo Lithium at 6.50 Canadian dollars per share. The total consideration is about 960 million Canadian dollars (approximately 4.96 billion yuan). Neo Lithium’s 20-day average price premium is about 36%, which is more than 18% premium to Friday’s closing price of 5.49 Canadian dollars.
The company’s most eye-catching asset is the Tres Quebradas project in Argentina, also known as the “3Q” project. Neo Lithium wholly owns the 3Q salt lake mining rights. The project is located at the southern end of the “Lithium Triangle” in South America, covering an area of 3500N0 hectares. The salt lake is currently the world‘s third-highest grade salt lake brine lithium extraction project, with a magnesium-to-lithium ratio of only 1.7, which has obvious resource advantages.
In June of this year, Neo Lithium revealed that it had reached an “important milestone” in the 3Q project: The company adopted the upgraded alkaline method, further fine-tuned the crystallization and other necessary fine-tuning, and finally achieved a battery-grade lithium carbonate with a purity of 99.891%. Waldo A. Perez, President and CEO of Neo Lithium, commented: “Regardless of the indicators, 3Q is one of the best lithium brine projects. In terms of grade, it ranks among the top three in the world; in terms of scale, it It can be ranked seventh in the world, and there is still room for exploration; finally, in terms of impurities, it is the lowest in all known salt lakes. These features will enable us to develop lithium resources at a very low capital cost.”
(Picture: 3Q development project timetable)
After the acquisition agreement was reached, Waldo A. Perez, President and CEO of Neo Lithium, said, “After a series of strategic negotiations, we are very pleased to provide this cash offer to all shareholders of Zijin Mining… It is now recognized as one of the largest and highest grade lithium brine deposits in the world. The valuation has been maximized in just six years. This process is the result of the collective efforts of our exploration team. We believe that the project is now being handed over to Zijin Mining. It’s time for the construction and production phases.”
Chen Jinghe, Chairman of Zijin Mining, said: “Neo Lithium’s 3Q lithium brine project in Catamarca, Argentina is one of the largest and highest-level projects of its kind in the world. The 3Q project is an important supplement to Zijin’s growing global asset structure. , Is a good choice for Zijin to enter the field of new energy minerals. Thanks to the efforts and investment of the professional team at the beginning of the project, we are confident that combining Zijin’s strong financial resources and mining expertise to develop this excellent asset into the world’s leading lithium carbonate One of the production mines…”
The announcement also stated that the transaction will still need to be completed in accordance with the Ontario Commercial Company Act, and will still need to be approved by at least two-thirds of the shareholders, as well as the government, regulatory agencies, courts and securities. The approval of the exchange includes the approval of the relevant departments of the People’s Republic of China and the approval of the Canadian Investment Act. If the transaction is cancelled, Zijin Mining will receive 35 million U.S. dollars, and if Zijin Mining revokes its offer, Neo Lithium will also be paid a 35 million U.S. dollar termination fee.
Chinese companies compete overseas
In recent years, many well-known companies have launched globalization strategies, and many listed companies have turned their attention to mergers and acquisitions overseas.
According to the Facts and Factors market research report, the global lithium compound market size and share revenue is expected to grow from US$3 billion in 2019 to US$11 billion in 2026, with a compound annual growth rate of 20% during the period. Therefore, the world‘s high-quality Lithium resources have become a hot cake for major companies to compete for. Chen Jinghe, chairman of Zijin Mining, emphasized very early that “Chinese mining companies are inevitable to’go global’.” In August of this year, he revealed in public that “the company will develop and deploy lithium resources, and plans to acquire some projects and mines in the future. Assets, and open up the entire industrial chain from upstream to materials.”
This large-scale acquisition of Neo Lithium also made CATL the biggest winner. As early as September last year, CATL used its subsidiary to subscribe for more than 10 million Neo Lithium shares at a price of 0.84 Canadian dollars per common share, with a total investment of about 8.58 million Canadian dollars (about 44 million yuan). Accounted for 8% of Neo Lithium’s total shares, becoming the company’s third largest shareholder. In more than a year, Neo Lithium’s acquisition cost rose from 0.84 Canadian dollars per share to today’s 5.49 Canadian dollars per share, an increase of 553.57%. Zijin Mining’s acquisition price is even more “expensive” than the acquisition cost of the Ningde era. 673.8%.
Foreign media INN is also quite optimistic about the prospects of this acquisition. Its research results believe that global lithium consumption is expected to increase three to five times in the next ten years, which will put tremendous pressure on the battery supply chain and the entire lithium market. “As global battery manufacturers continue to expand their manufacturing operations, Neo Lithium is fully prepared.”
On September 28, Millennial Lithium of Canada announced that it had agreed to accept the acquisition of Chinese lithium battery giant Ningde Times for a transaction price of 376.8 million Canadian dollars (approximately 297 million US dollars). Behind this acquisition is the Ningde era’s “cutting” of Ganfeng Lithium’s transaction: Ningde era bid 3.85 Canadian dollars per share to acquire Millennium Lithium, surpassing Ganfeng Lithium’s 3.6 Canadian dollars per share in July this year. The quoted price is also about 29% higher than the 20-day average closing price of 2.98 Canadian dollars for common stocks of Millennium Lithium on the Toronto Stock Exchange, defeating Ganfeng Lithium to win the bidding war.
At the same time, Millennium Lithium also stated that CATL agreed to pay 10 million U.S. dollars (approximately more than RMB 64 million) to Ganfeng Lithium in liquidated damages.
Although Ganfeng Lithium was cut off, it also achieved results in overseas mergers and acquisitions during the year. In June, its wholly-owned subsidiary Ganfeng International acquired a 50% stake in Dutch SPV for US$130 million, and will provide its subsidiary LMSA with no More than 40 million US dollars in financial support to help LMSA develop and construct the Goulamina spodumene project. The company will obtain the 50% underwriting right of the first phase of the Goulamina project with an annual production capacity of about 455,000 tons of spodumene concentrate. If the company directly provides financial assistance or assists LMSA to obtain debt funds provided by third-party banks, it can obtain the underwriting right of the remaining 50% of the production capacity.
Shanghai Nonferrous Network pointed out that my country’s domestic copper, aluminum, nickel, cobalt and other resource reserves account for less than 5% of the world, and the resource reserves are small, but the current situation of high demand is destined to rely on imports. In particular, the external dependence of copper, nickel, lithium, and cobalt resources exceeds 70%, and domestic mining companies must “go global” to control their own destiny.
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