Allkem General Discussion, page-1455

Back in the back end of 2019, Galaxy made a sly move on Alita which had gone broke and put its Bald Hill lithium mine in southern WA into care and maintenance. It bought the debt owed by Alita. However in the end Galaxy (and Alita shareholders) got shafted by a bid from a Chinese company, Liatam Mining through a specific purpose vehicle called China Hydrogen Energy, for Alita being accepted. Trouble is that Liatam Mining needed Foreign Investment Review Board (FIRB) approval. That Liatam Mining withdrew its bid for Alita and its FIRB application would indicate that it was advised of the hurdles it faced.

Pheonix-like, a new bid was made later in 2020 by a US registered business, Austroid (not to be confused with haemorrhoids which may be what the Chinese thought FIRB was inflicting on them). The bid was again brokered by the receivers, KordaMentha, (who, to be fair, just wanted its money) but again needed to be approved by the FIRB. Close to 2 years of procrastination from the previous Treasurer means that it now becomes a test of gonads for the new bloke, Jim Chalmers. The key issue seems to be that not everyone believes that there is no connection between those behind Austroid and those behind Liatam Mining, and therefore the same concerns FIRB found with Liatam remain unaddressed. From experience I know that if you close your eyes and assume Chinese business practices are not amongst the worst in the world then it is possible to take what they say at face value. If Jimbo adopts that practice then there is a good chance the decision will be a tick and flick maneuver.

But here's a couple twists. In March this year KordaMentha advised that the subsidiary of Alita that actually owns Bald Hill had entered into an agreement with a Chinese company, Yihe Cleantech Material Limited for Yihe to provide a $30m loan, for Yihe to have the offtake rights and for Yihe to be provided a security deed that the obligations given to it are locked in. Austroid assured the receivers that it has no relationship with Yihe.

The second twist is that "they" advised that they have effectively begun re-commissioning the mine and plant at Bald Hill in anticipation that FIRB will give approval for them to begin re-commissioning the mine and plant at Bald Hill. Again, standard tactics from the Chinese: they'll keep going until they are made to stop. So, they are spending money and signing contracts even though they do not have clear title to the assets.

One angle could be for Jim Chalmers to put the decision in the bottom drawer knowing that if a FIRB approval does not come the deal involving Austroid and Alita runs out in January next year. But by then the Chinese will have effectively restarted operations, including loan agreements and offtake agreements and they will argue it's not possible to unscramble the omelette.

Long story, I know, but the point is that it may be a chance that what Galaxy failed to pull off in 2019 to be possible for Allkem in 2023. Just a thought.