Here is The full monty This $136m lithium deal may be just...

Here is The full monty

This $136m lithium deal may be just thestart

They are the majority owners of Australia’s best lithium address, but now IGO Group and Chinese company Tianqi want to spend $136 million muscling into a second lithium province in Western Australia.

The companies, which have acted in partnership on lithium matters since late 2020, agreed to pay $136 million to acquire lithium explorer Essential Metals under a plan to get a foothold in the lithium production zone between Kalgoorlie and Norseman.

Essential Metals has been drilling an early-stage deposit calledPioneer Dome, which is years from development and would barely move the needlefor IGO and Tianqi in the context of their 51 per cent stake in Australia’sbiggest and best lithium mine at Greenbushes.

Greenbushes is expected to run for at least another 20 years andis about 600 kilometres from Pioneer Dome as the crow flies, suggestingMonday’s acquisition is about IGO and Tianqi’s desire to push into a newlithium province rather than simply extend or expand the Greenbushes hub.

Established lithium mines already exist close to Pioneer Dome; theMt Marion mine that Chris Ellison’s Mineral Resources shares with Chinesecompany Ganfeng is about 75 kilometres north.

Butperhaps more notably, the Bald Hill lithium mine is about 60 kilometresnortheast of the tenements and its future remains mired in uncertainty.

BaldHill has been in the hands of administrators since August 2019 when its ownerAlita Resources collapsed.

FIRBrejection

Apreliminary deal to sell the mine to a Chinese-backed company in 2019 failed towin approval from Australia’s Foreign Investment Review Board.

Receiversthen sought to sell the mine to US-registered Austroid, which had common linksto the Chinese company involved in the failed 2019 deal.

TheMorrison government did not approve Austroid’s application and Austroid lodgeda revised FIRB application last year for the new Labor government to consider.

Basedon the most recent disclosures to the Singapore exchange by Alita and to theAustralian Securities and Investments Commission (ASIC) by receivers McGrathNicol,the sale of the Bald Hill mine to Austroid still has not secured final FIRBapproval.

Thesale agreement has a sunset date of January 31, meaning IGO and Tianqi’s pushinto the proverbial lithium neighbourhood could be well-timed.

Pricedat 36pc premium

EssentialMetals directors have unanimously recommended that shareholders vote in favourof the offer, which would have IGO and Tianqi pay 50¢ for each Essential share.

Theoffer is priced at a 36.3 per cent premium to Essential’s share price over thepast 40 days.

Essentialshares fetched 21¢ this time last year and the stock was as low as 9¢ in June2021.

IGObought 49 per cent of Tianqi’s Australian lithium assets in late 2020 under adeal that pushed IGO’s nickel and gold portfolio more toward battery minerals.

Thelithium joint venture between IGO and Tianqi owns 51 per cent of theGreenbushes mine, with US producer Albemarle owning the remaining 49 per centof the mine.

Thesituation means Tianqi effectively owns 26.01 per cent of the Greenbushes minewhile IGO owns 24.99 per cent.

The twocompanies also share a lithium hydroxide processing plant south of Perth atKwinana, where concentrated lithium from Greenbushes is turned into highervalue lithium hydroxide for batteries.

IGOowns 49 per cent of the Kwinana plant while Tianqi owns the rest.