Lithium takeovers ignite the Pilbara

Deal fever swept the Australian lithium sector on Monday, with Chilean giant Socieded Quimica Y Minera set to play a central role in two deals.

One of those could exceed a billion dollars, after lithium explorer Azure Minerals halted trading of its stock on Monday ahead of “a potential change of control transaction”.

Azure did not name its suitor, but SQM was the prime suspect, having offered to pay close to $1 billion, or $2.31 per share, to acquire Azure in July.

The earlier bid was rejected, but SQM remains the largest shareholder in Azure with 19.9 per cent, and is eager to grow its Australian lithium footprint as a way of diversifying its income beyond Chile.

SQM is already partnering with Wesfarmers on Western Australia’s Mt Holland lithium mine and Kwinana lithium hydroxide processing plant.

Argonaut analyst George Ross speculated last month that Wesfarmers and SQM could further their partnership by making a joint bid for Azure.

While Azure was formalising its trading halt on Monday, SQM was buying a strategic foothold in lithium exploration territory about 200 kilometres east of Azure’s flagship Andover project in the West Pilbara.

The Chilean company paid $2.5 million to Gary Morgan’s Haoma Mining for a slice of the unlisted lithium exploration company, Pirra, which is canvassing the area.

Pirra has exploration acreage about 20 kilometres away from Wildcat Resources’ prospective Tabba Tabba lithium project. SQM will eventually own 40 per cent of Pirra once the deal goes through, with Calidus owning 40 per and Haoma 20 per cent.

The Australian Financial Review revealed on Sunday that billionaire Chris Ellison’s Mineral Resources had been sounding out Wildcat shareholders with a view to building a stake in the explorer after it produced encouraging lithium drilling results.

Tabba Tabba is located about 87 kilometres from MinRes’ flagship Wodgina lithium mine, about 50 kilometres from Pilbara Minerals’ Pilgangoora mine, and just over 200 kilometres from Azure’s Andover project.

Wildcat’s market capitalisation was $19 million in May, but excitement around the Tabba Tabba discovery and speculation about Mr Ellison’s intentions took it to $619 million on Monday.

The “potential change of control transaction” flagged by Azure on Monday comes just a week after US lithium giant Albemarle abandoned a $6.6 billion takeover bid for WA developer Liontown Resources.

It extends a staggering rise to prominence for Azure, which had a market capitalisation of just $68 million in January.

Early drilling results from Azure’s Andover prospect near the Pilbara town of Roebourne sent Azure shares soaring in June, and by August it was worth almost $1.2 billion.

That valuation was achieved despite the fact Azure’s exploration work is at such an early stage that the company has not yet declared a mineral resource estimate for Andover.

A mineral resource estimate is the first major, formal disclosure milestone that an explorer must pass to enable investors to assess the size and quality of a geological discovery.

A takeover of Azure would be another triumph for legendary explorer Mark Creasy, whose company Yandal owns just over 13 per cent of Azure shares and also owns 40 per cent of the Andover project.

Mr Creasy increased his stake in Azure this month to just over 13 per cent