SMOKE IS COMING OUT... IS UNFRIENDLY M&A - CONSOLIDATION STARTS?
On Monday something very important has happened in the lithium space of WA Australia.
IGO/Tianqi JV which holds 51% of Greenbushes mine put a takeover bid for ESS which has a small project with 11mt at 1.16% grade in the area between Kalgoorlie and Norseman.
I think we are seeing the M&A-Consolidation smoke from the Pioneer Dome project.
FLAMES..!
We may see the flames coming out from other parts of the area. That will reveal that the M&A activities has started in full force. And I'm hoping to see bigger ones in this year. That may include LTR as well.
My takes from this takeover bid of IGO/Tianqi JV for ESS is as below;
Lithium supply/demand deficit will get even wider in coming years, and the suppliers know that well.
Therefore even the partners of largest and most efficient lithium mine in the world namely Greenbushes (operating as Talison JV) are desperate to find new supply feed for their process plants. (Greenbushes is operating under Talison Lithium JV which Albemarle/US holds 49% Tianqi holds 26% and IGO holds 25%).
The reason is as I said 3 years ago "The high grade resource life of Greenbushes is limited with about 10 to 12 years" due to their very high rate of ore processing (full 3 trains +1 waiting for FID)
In last 5 years there is no new large resource could be find in Australia and in the world even at one third size of KV project.
That is now realised by everyone despite we were telling that here on HC for a long time. And the panic started even by the big lithium producers.
There is only 5 large hard rock resources (all in WA), but they are already in tight hands.
The M&A-Consolidation activity always starts from the small ones. Then goes to the bigger ones.
Only Solution for having the last large project; ACCQUISITION OF SATELLITE PROJECT DEPOSITS in he last lithium province ! It's the area N-NW of Norseman and S-SE of Kalgoorlie.
There are already one large producing project (Mt Marion of MIN/Ganfeng) and one bankrupted A40's Bald Hill project there. Plus 3 small projects. ESS's Pioneer Dome is being the smallest.
MIN is already very active at the area. Even exploring (by Norseman JV) the extension of Anna deposit which belongs to LTR's Buldania Project. MIN also has 8% stake in GL1 which owns Manna Project at the area.
A40's project was producing but bankrupted. Now under a lots of court cases and FIRB progress. A hard one to acquire for IGO/Tianqi JV. (a bid was refused as the bidder was identified as a Chinese controlled company even though US established).
Buldania Project of LTR is also hard to acquire because LTR is now one of large 5 lithium companies. Exploration continues. I'm expecting it to reach over 30mt resource until end of this year.
Because the Pioneer Dome project is too small to do anything, it is clear to me that IGO/Tianqi JV must be aiming to make more moves on the other projects at that region. The move by IGO/Tianqi can only be considered as only the testing of first step and nerves of MIN/Albemarle JV.
I am expecting a move from MIN (supported by Albemarle) for ESS; Maybe a counter offer.
Because Albemarle is also desperate for lithium supply to Greenbushes plant and its Kwinana lithium hydroxide refinery, it should not allow the IGO/Tianqi JV to have Pioneer Dome and others.
Time will tell..
"The high grade resource life of Greenbushes is limited with about 10 to 12 years".
The interesting and also the most important point about this move by IGO/Tianqi JV is because the Greenbushes mine will run out of its high grade eve low grade ore just after 2030.I've made analysis about that and posted on HC 3three years ago. I also presented it to Tom Goyder on our meeting on Feb 2020.
This, was my last post #:63770484 about the issue on 19/09/2022.
"The high grade resource life of Greenbushes is limited with about 10 to 12 years".
I posted this graph couple of times.
The takeover bid by IGO/Tianqi JV to a very small project like ESS's Pioneer Dome clearly shows that the owners of Greenbushes mine are desperate to find some lithium resource to feed the giant Greenbushes mine which has 3 trains of spod production plant and 4th train is waiting for investment decision. They have upgraded the mine in last two years. However they underestimate the difficulty of finding new lithium resources. In last 5 years there is no new large resource could be find in Australia and in the world even at one third size of KV project. The graph below which I made 3.5 years ago is still valid.
On this graph there is only 5 large hard rock resources, and they are already in tight hands.
The M&A (or food chain) always starts with the small ones are eaten by the bigger ones. Therefore the M&A between those big 5 will happen later after the consolodation of small ones.
Only Solution For having the Last Large Project; ACCQUISITION OF SATELLITE PROJECT DEPOSITS In The Last Lithium Province !
Everyone in lithium business has now, realised that it is already late to spend money to explore a new resource. There is only one way to have a large project deposit: it's the consolidation of small satellite project deposits (only around 80mt at low grade though).
That directs all smart minds to one point: the projects between Kalgoorlie and Norseman.
As you can see on the map I made below there are 5 projects there. Mt Marion is, already a good one and not for sale because it's owned by MIN and Ganfeng. It's already producing for 4 years.
LTR's Buldania project is also there.
Bald Hill project of bankrupted A40 is the largest one but it is still suffering by court cases. The US established by Chinese backed company made a bid to buy it but FIRB (Foreign Investment Review Board) did not accept it.
MIN is partner with Albemarle in Wodgina spod project and Kwinana refinery. MIN also invested in GL1's Manna Project.I think both partners of Greenbushes JV will be fighting with each other for these 4 resources in this area.The sides will be: IGO/Tianqi vs MIN/ALBEMARLE.
It will be interesting to see if IGI/Tianqi JV's bid will be outbid by a bid from MIN/Albemarle.
Because the Pioneer Dome project is too small to do anything, it is clear to me that IGO/Tianqi JV must be aiming to make more moves on the other projects at that region.
That move would also be related to LTR's Buldania project. LTR is still exploring at Buldania and they are aiming to increase the resource at least double of current 15mt.
Btw, MIN made a JV called Norseman JV with a gold explorer PRN and with another company. PNR is holding a tenement which is next to LTR's Anna deposit in Buldania project. They are now drilling the NW section of Anna pegmatite extensions which is in their tenements. They found couple week pegmatites there atm.
That shows that MIN is very active in this area, even reaching and touching to LTR's project extensions. Now we are seeing the smoke from the Pioneer Dome project.We may see the flames coming out from other parts of the area.
That will reveal that the M&A activities has started in full force. And I'm hoping to see bigger ones in this year. That may include LTR as well.
LTR Price at posting:
$1.49 Sentiment: Hold Disclosure: Held
(20min delay)