How Perth Glory’s ex-owner aims for goals on the NASDAQ

Tony Sage’s mining minnow European Lithium is involved in a SPAC deal that he hopes could net him and his shareholders a big payday.

Hans van LeeuwenEurope correspondent

Nov 27, 2023 – 7.08am

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London | If you’re an investor in one of the ASX-listed minnows that is prospecting for lithium in Europe, you need patience and a strong stomach.

It has been a long journey for companies such as Vulcan Energy, European Metals, European Lithium and Infinity Lithium, as they try to cut through Europe’s dense thicket of red tape. And in the meantime, their share prices have been swept up in the great lithium rollercoaster.

Hoping for NASDAQ glory ... European Lithium executive chairman Tony Sage. Getty Images

This month there have been apparent signs of progress. European Metals and Vulcan Energy both told the ASX they had wrapped up pilot programs or engineering studies, bringing them closer to key execution milestones. Infinity revealed a grant from the Spanish government, a further signal that its political fortunes have improved.

Investors have had to be particularly patient with European Lithium, which has long seemed a more subdued member of this pack. But in the past year, executive chairman Tony Sage has been busy – and he reckons his frenetic deal-making could be about to pay off.

If he’s right – and it’s still an if, as the timetable has slipped several times – he claims that not only will his company be able to move forward on its lithium mine in Austria, but also that his shareholders should, or at least could, be in line for a trend-busting pre-Christmas windfall.

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Sage is trying to pull off a NASDAQ listing using a special purpose acquisition company. For anyone uninitiated, or whose memories of the 2020-21 SPAC boom are hazy: a SPAC is a company that floats on a stock exchange without any particular business, and then has a two-year window to merge with an existing company that is looking for a backdoor route to listing.

In the US, the SPAC will typically offer its shares at $US10. When an acquisition takes place, the SPAC investors can either cash out or take up shares in the target. If no acquisition takes place, they get their money back.

Sage has been working with a NASDAQ-listed SPAC called Sizzle, which at the time of their merger announcement in October last year had $US159 million ($241 million) sitting in its trust account.

Although Sizzle’s founders seem largely drawn from the world of hospitality, they agreed to buy the rights to European Lithium’s Wolfsberg mine site for $US750 million, creating a new company NASDAQ-listed called Critical Minerals Corp.

European Lithium would own 80 per cent of the shares in CMC, and Sage plus his fellow directors would take charge of it. They would also retain an ASX listing to hold Perth-based European Lithium’s remaining assets: further interests in Austrian lithium sites, a small stake in a Greenland project, and an iron ore prospect in western Ukraine.

About a quarter of Sizzle’s investors have since redeemed their units, cutting European Lithium’s expected windfall by something in the order of $US50 million. But Sage tells The Australian Financial Review he is hoping for another $US60 million to $US70 million in fresh subscriptions.

The interesting thing will be what happens to the SPAC’s share price when it becomes CMC.

European Lithium’s share price has hovered at around 8 cents, giving it a market cap of about $109 million. Sizzle’s share price is close to $US11. Sage says that if European Lithium owns 80 per cent of a NASDAQ company trading at that price, the ASX share price would have to move towards 90 cents.

SPAC prices typically drop sharply after the merger is completed, but even at, say $US3, that would be quite the arbitrage play.

It’s also possible that CMC could re-rate to be more like European Lithium. Sage argues that what might sustain CMC’s price is that more than a dozen large American ESG funds with a lithium-tracking element would need to buy the stock.

The question is whether it will ever happen. SPAC deals do fall over. The timetable has been pushed back several times, and the deal does not yet have a green light from the SEC.

Sizzle is on its fifth amended filing to the SEC. Sage says he is confident of getting approval before Christmas, and claims the regulator’s latest batch of queries had been straightforward to answer.

If it does go through, the second question is whether the lithium mine will ever happen. European Lithium did release the all-important definitive feasibility study for Wolfsberg back in March.

Consultants DRA Projects found the mine could yield 8800 tonnes a year of battery-grade lithium hydroxide monohydrate for 14.6 years. The project’s estimated capex was $US866 million, for a post-tax net present value of $US1.5 billion.

Since that valuation, Sage has enlisted Saudi Arabian conglomerate Obeikan as a joint-venture partner. Rather than process the lithium spodumene concentrate in Austria, CMC will ship it to Saudi Arabia, who will do the processing and then sell it to the company’s offtake partner, BMW.

Sage says this will reduce both the capex and opex of the project, and save time on permitting. He says the contract is in its final stages, and will be signed in the coming weeks.

This could raise a conundrum for BMW. The point of all this lithium mining in Europe is to secure and diversify the carmakers’ supply chains and to fulfil their ESG obligations. Saudi Arabia may not have figured in the car giant’s thinking. A BMW spokesman would not discuss the deal in detail, but said the offtake agreement remained in place.

All in all, it has been an eventful year for the colourful Sage – he had to relinquish his ownership of the Perth Glory soccer club this year, after being unable to pay players and staff. Can he cap it off by getting all these ducks in a row? That remains to be seen.