It is interesting to review the new Farm-in agreement MIN has signed with Marquee Resources (MQR) for its West Spargoville exploration area which sits fairly close to Mt Marion, and between it and the ESS tenements.
https://www.investi.com.au/api/announcements/mqr/7cf7c6dd-a20.pdf
West Spargoville exploration results, while moderately encouraging, offer little indication that a meaningful resource exists there that would support a mine and transport operation to Mt Marion.I think their best intercepts from drilling so far is 1metre @ about 1.1% Li2O and a couple at 4m @ about 1%. After that they quickly tail off in concentrations of lithium but there are a number of other potentially valuable byproduct style elements again in minor concentration. Yet, MIN has committed $4.8m in exploration (over 5years!) funding to gain a controlling interest, with various permutations of outcomes including funding a mining operation.
Obviously, they might get lucky and as I am not a geologist, I assume they have high hopes. It does indicate to me MIN's very clear strategy to increase investment in the region and is akin to its strategy in iron ore to consolidate stranded assets in the West Pilbara and operate them under JVs if necessary.
Are there implications for ESS? It does seem to add to the case for them to go further with its regional focus and strengthens the case for a takeover given we have a material shovel ready resource...but that has all been said before. What are they waiting for? The proposal to MQR is for a build own and operate mine with the minority interest party just participating at mine gate price. That seems quite likely to be the type of proposition that they would put (or may have put) to ESS.I feel sure that sort of proposal is of virtually no interest to ESS management given their current 100% ownership of the resource. However, they apparently have no alternate plan to extract the value from the asset.
If ESS management cannot reach some sort of common ground with MIN then we might have a long wait for value. There are a few factors in our favour though. Despite the possibility that MIN could wait out the 4 month period in order to make a lower priced offer than the $0.58 per share price paid up to in their earlier acquisitions, they are so close to the 20% takeover threshold that they'll still require a price of say at least $0.50 to garner any interest at all. And in the meantime hopefully ESS is exploring offtake partner interest. I can't imagine that there are not OEMs out there like VW, GM and Ford (or even Tesla) who would love to be supplied with Australian produced lithium that could be refined here or in North America with subsequent qualification for EV subsidies under the US Inflation Reduction Act.
Patience is definitely required but the advantage MIN has is that with many alternate investment options for us shareholders, they may be able to out-wait us and pounce with a low offer. Their risk is that this resource gets committed to others in the meantime and that it doesn't solve their Mt Marion shortage of ore. Surely there's a deal here that can be win win?!
Regards
DF
