(Bloomberg) – A proposed $ 3.1 billion merger between two Australian miners is set to create one of the world’s largest manufacturers of lithium products to meet rapidly growing global demand for batteries for electric vehicles.
The deal between Orocobre (OTC:
OROCF
) Ltd. and Galaxy Resources (OTC:
GALXF
) Ltd. is the largest mining deal of the year to date, according to Bloomberg. The shares of both companies close at their highest level in three years in Sydney. The merger would create the world’s fifth largest producer of lithium chemicals, the refined form of raw material used to make batteries for electric vehicles.
Miners and battery manufacturers are in a hurry to secure supplies of lithium as the EV is expected to be available Madness will lead to a structural deficit this year, and prices are already rising again after a three-year slump. According to BloombergNEF, battery needs are expected to increase tenfold by 2030 as the global clean energy transition accelerates.
The new company will be a global player in the manufacture of lithium chemicals. said Reg Spencer, director of mining research at Canaccord Genuity Australia Ltd. He said it could become the number three producer by 2025 if all growth projects are carried out.
The A $ 4 billion deal valued Galaxy at about A $ 3.53 per share, which is a discount of 2.2 % by the close of trading on Friday and is endorsed by both company boards. Martin Perez de Solay, Orocobre’s Chief Executive Officer, will lead the new group.
Orocobre will offer 0.569 of its shares for each Galaxy share and own 54.2% of the merged company, with Galaxy owning 45.8%. Orocobre was advised on the deal by UBS AG, while the advisor was Galaxy Standard Chartered (OTC:
SCBFF
) Plc. The deal is expected to close in mid-August 2021.
The merged group, which has not yet been officially named, will be headquartered in Buenos Aires, but its primary stock listing will remain in Australia.
The deal offers companies one geographically diversified set of assets. Orocobre sells lithium carbonate from its operations in Olaroz, Argentina, while Galaxy has a mine in Australia and growth projects in Canada and South America.
Lithium raw materials are most commonly extracted from brine operations, where liquid is extracted from underground reservoirs into huge evaporation ponds or traditional hard rock mines is pumped. China is the largest supplier of electric vehicle batteries with most of the world’s manufacturing capacity and has a handle on the processing of the goods it needs.
The growth profile of the combined group’s existing assets has put it on the right track, in the next five to achieve a share of 10% of the lithium market by seven years, said Perez de Solay in an interview that was published by « ??? » was supported. « A strong balance sheet that enables us not only to implement these projects, but also to continue to grow. » The world’s leading lithium producers currently include Sociedad Quimica and Minera de Chile SA as well as Albemarle (NYSE:
ALB
) Corp.
Spencer of Canaccord said that due to its geopolitical and financial volatility, there are risks in having most of an operation in Argentina, although Orocobre’s local management team has so far proven adept at navigating those risks .
« From the perspective of Galaxy » we were looking for a partner who had in-depth Argentine experience in the country, and we have that in Orocobre. said Simon Hay, Galaxy CEO, who will assume the role of President of International Business in the new organization. The merger will help jeopardize Galaxy’s Sal de Vida growth project in the South American country, he said.
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