Azure Minerals (ASX: AZS) shares are up 43%. AZS shares are up because SQM, the Chilean lithium miner, has agreed to take over Azure for cash. Therefore the share will trade at that cash offer - perhaps a fraction underneath to account for the interest foregone by waiting for the deal to close. So far so sensible: “Australia’s Azure Minerals Ltd said on Thursday it had agreed to a takeover offer from Chilean mining giant Sociedad Química y Minera de Chile (SQM), in a deal implying an equity value of A$1.63 billion ($1.03 billion) for the lithium producer. Azure, which owns around 60% stake in the highly prospective Andover lithium project in Western Australia’s Pilbara region, had previously rejected a buyout bid from SQM that valued the miner at A$901.4 million.”
Well, we admit to having our doubts. We still think the long term lithium price is going to go lower. But it’s obviously possible that the 75% decline over the past 12 months is the low point and that it’s uphill from here. Our opinion on this is what drove our view of the Albemarle and Liontown bid - Albemarle had a lucky escape from trying to buy at the top of the market.
The complicating issue here is that Gina Rinehart killed that Liontawn deal by buying 19.9% of the equity and thus frustrating a full take over. And now, in this, the Azure deal: “ Stockbroker Euroz Hartleys was hoovering up shares in lithium play Azure Minerals on Thursday morning, after the company signed a binding deed with Chilean giant SQM at $3.50 a share. By 1:15pm, it had traded nearly 64.9 million shares in Azure Minerals at $3.50 or $3.49 apiece, which is bang next to the bid price. The identity of the buyer was not known. It represented about 14.5 per cent of the company. However, last time that combination happened – Euroz buying stock at bid levels in a lithium M&A target – it was iron ore billionaire Gina Rinehart behind the buying. She built a 19.99 per cent stake at Liontown Resources, which eventually flattened out the $3-a-share bid as Albemarle walked citing complexities in getting a deal done. Liontown had to launch an emergency capital raising at $1.80 a share.”
We’re all really pretty sure that buying is Rinehart.
Azure Minerals share price from Google Finance
The point is therefore that this isn’t, by any means, a done deal. It’s also likely true that if the deal doesn’t go through that SQM will end up with a significant portion of the Zure equity but not all of it. At which point we’d have to expect a stock offer to build out the mine. And, obviously, a fall in the stock price.
It’s even worth noting that there’s no guarantee at Azure Minerals. AZS shares are backed by very favourable geological and drilling results but we’re not at proof of mine as yet. What really matters in this short term is what Ms. Rinehart does.
