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Lithium, page-38

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wingedwarrior

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26/01/21

16:52

Post #: 50450113
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Originally posted by sabine ↑

A reminder on what Covalent is all about from the AFR last December, with author Brad Thompson laying some ‘blame’ on WES’ 50% joint venture partner in the Mt Holland deal, SQM, for causing severe financial stress to Tianqi - its’ ~25.9% shareholder (therefore around 6.5% part owner of Covalent?) whose non-Covalent Australian operations were recently bought into by IGO;
cheers

https://www.afr. com/companies/mining/wesfarmers-faces-big-lithium-call-after-igo-s-1-9b-deal-20201209-p56m1e
Wesfarmers faces big lithium call after IGO's $1.9b deal
Brad ThompsonReporter
Dec 9, 2020 – 3.57pm

Nickel and gold miner IGO Limited says it has bought at the bottom of the lithium market by snaring a big chunk of mining and processing assets controlled by struggling Chinese battery metals company Tianqi.

The deal comes as Wesfarmers faces D-Day on its big ticket lithium project in Western Australia and as battery metals giant Albemarle moves closer to producing its first lithium hydroxide from a plant being built in the state's south-west.

IGO will pay Tianqi $US1.4 billion ($1.9 billion) for a 25 per cent stake in Australia’s top lithium mine and a 49 per cent per cent stake in Tianqi’s troubled lithium hydroxide plant at Kwinana, south of Perth.

Wesfarmers is in the throes of making a final investment decision on building a similar plant nearby in Kwinana that would process lithium from its Mount Holland project owned jointly with Sociedad Quimica y Minera de Chile.
The Rob Scott-led Wesfarmers will make its call early in 2021 after putting a decision on hold as lithium prices slumped.

Market sentiment is rapidly improving as the world emerges from the COVID-19 pandemic and jurisdictions such as Britain move to ban sales of petrol and diesel cars by 2030.

IGO managing director Peter Bradford said the company had been in the running for a slice of the Tianqi assets for months and had stuck to an offer price made at what he reckons is the bottom of the lithium market.

Mr Bradford said price tailwinds were emerging for both spodumene and lithium hydroxide.
“We have transacted at what we believe is the bottom of the lithium price cycle and on the eve of the explosion of the electricification of transport and disruptive demand for lithium,” he said.

“We do not believe we were the top bidder, but we were prepared to consider a transaction structure that worked for Tianqi and which provided IGO the once-in-a-lifetime opportunity to invest in what is truly a world-class integrated lithium business.”

Tianqi owns a 51 per cent stake in the Greenbushes mine and has already spent $US700 million on Australia’s first hydroxide plant at Kwinana.
IGO and Tianqi will become partners in an entity that holds the 51 per cent stake in Greenbushes and owns the hydroxide plant, with Tianqi retaining a 26 per cent stake in the mine and a 51 per cent stake in the plant.
Albemarle, which owns a 49 per cent of Greenbushes and is building a lithium hydroxide plant at Kemerton, is not involved in the IGO-Tianqi transaction.

Mr Bradford said a piece of the world-class Tianqi assets would not have been up for grabs if the Chinese company had not bought a big stake in Chile’s SQM at the top of the lithium market.
He said that in contrast, IGO was buying at the bottom and with Tianqi under financial stress.
Tianqi, which paid $US4.1 billion for a stake in SQM before the lithium price bubble burst, will use the $US1.4 billion from the IGO deal to refinance its debt.
The Shenzhen Stock Exchange-listed company’s lenders, led by state-owned CITIC Bank, last week agreed to give Tianqi a 26-day extension on repayment of a $US1.9 billion loan.
IGO intends to fund the acquisition by taking on $1.1 billion in debt, raising up to $766 million in new equity and using its cash reserves.
The IGO raising launched on Wednesday involves the issue of up to 166 million new shares, or about 28 per cent of the company's current issued capital.
The raising is made up of a $446 million fully underwritten placement at $4.60 and a $320 million 1-for-8.5 pro rata entitlement offer.
The offer price represents a 9.7 per cent discount to IGO’s last traded share price of $5.095 on December 7.
IGO considers it a transformative deal for the company as it looks to a future in battery metals and pursues a sale of its 30 per cent in the Tropicana gold mine in WA.
Mr Bradford said the proceeds from any sale of the Tropicana stake would be used to pay down debt associated with the Tianqi deal.
Greenbushes is the world's biggest and lowest-cost hard rock lithium mine, producing about 21 per cent of global supply in 2019.
But even it has felt the impact of the lithium downturn, with one of two chemical grade processing plants at the mine now in moth balls. It is slated to restart when demand improves.
Tianqi's financial woes have been compounded by long delays and commissioning problems with the first stage of its Kwinana plant, which cost almost double the original budget.
As well as the $US700 million invested so far, another $US30 million is needed for the long-awaited commissioning of train 1 early in 2021 and $US190 million to complete stalled work on stage 2. Each train will have capacity to produce 24,000 tonnes of battery-grade lithium hydroxide a year.
Mr Bradford said Tianqi had secured additional land at Kwinana and could eventually add more trains to process concentrate from Greenbushes.

Tianqi's cost blowouts and production ambitions will be weighed up by Wesfarmers as it crunches the numbers on the Mount Holland mine and associated 45-tonne-a-year hydroxide plant.
Wesfarmers paid Kidman Resources $776 million of its half share in the project in 2019. It then earmarked another $700 million as its share in developing the mine and plant in partnership with SQM.

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And now, via Reuters and other major news sources, President Biden announces his clean energy intent to convert the entire US govt fleet to EV's and ramp up lithium battery production and usage including thousands of charging stations. WES holders should be very pleased & WES needs to light a similar fire under our Australian government who are yet to develop a national strategy regarding this technology and our fortunate Li resource global potential.
https://www.reuters.com/article/us-usa-biden-autos-idUSKBN29U2LW

WES Price at posting: $54.34 Sentiment: Buy Disclosure: Not Held
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