Latest Lithium Takeover Bid Sparks Speculation on More M&A Activity to Come

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VANCOUVER, B.C., Jan. 12, 2024 /PRNewswire/ — USA News Group  –  A new wave of mergers and acquisitions is on the rise in the lithium sector, in the wake of the latest successful takeover bid of Alpha Lithium Corporation by a leading Latin American energy company, Tecpetrol. After already announcing the acquisition of 102,692,615 common shares (54% equity) at a per-share bid price of C$1.48, Tecpetrol has officially now spent over C$150M on the Alpha transaction. That number could still climb, as the remaining ALLI shareholders have until Oct 31 to accept the offer for themselves, meaning even more lithium shareholders could be flooding the market with new cash to spend on other lithium plays with upside. This latest deal comes in the wake of the mega-merger between Allkem Limited (TSX:AKE) (OTCPK:OROCF) and Livent Corporation (NYSE:LTHM), analysts are turning their eyes toward more M&A activity in the space and other potential near-term takeout targets, such as Lithium South Development Corporation (TSXV:LIS) (OTCQB:LISMF), and Argentina Lithium & Energy Corp. (TSXV:LIT) (OTCQX:LILIF).

In the case of Lithium South Development Corporation (TSXV:LIS) (OTCQB:LISMF), the lithium developer recently announced that it had expanded it’s HMN Li Project  resource  by 175%. This material change in their flagship asset HMN Li’s resource estimate almost immediately gave Lithium South license to commission an updated Preliminary Economic Assessment (PEA) and expand upon its production goals.

“We are very pleased with our new updated lithium resource at the HMN Li Project,” said Fernando Villarroel, Company C.O.O. and Project Manager of Lithium South when the company announced the resource expansion. “The quality of the brine has exceeded our expectations.”

The company has already begun a pumping well/production well installation program  for three of the five claims that make up the HMN Li Project. The first well has been completed at the Natalia Maria claim block to a depth of 60 meters to take advantage of the observed geology. At this location, a core well returned an impressive 1176 mg/l Li back in April 2023.

Lithium South originally published an NI 43-101 PEA for the project back in 2019, when it only had a defined resource of 0.57 Mt Lithium Carbonate Equivalent (LCE) and the market price for lithium was assumed to be US$12,420 per tonne over the duration of the project. Today in 2023, the HMN Li has a newly calculated resource of 1.583Mt of LCE (with 90% attributed to the top ‘Measured’ category), and the lithium market price has stabilized at around $ 22,000  per tonne.

As well, the salt flat called Salar de Hombre Muerto, where HMN Li is located, has attracted billions of dollars in investment—most notably from Korean giant POSCO. Back in 2022, POSCO committed to investing US$4 billion on its Sal de Oro Lithium project, which is located immediately adjacent to the edge of the HMN Li project’s border. Now in 2023, POSCO has announced a US$800M investment then another US$1.7B investment into Argentina to support the project. Most recently, POSCO also announced a potential investment in a direct lithium extraction technology ( DLE ) )being developed by EnergyX . While not a yet commercially applied technology, DLE is gaining market interest as it can boast high recovery rates.

All of this nearby activity is reflecting upon projects like Lithium South’s, as well as for peers such as Argentina Lithium & Energy Corp. (TSXV:LIT) (OTCQX:LILIF) which recently commenced drilling on at Rincon West project in a campaign designed to explore the contiguous Rinconcita II concession and provide an eastward extension of their flagship project. So far the project has already captured the attention of Stellantis, to the tune of a US$90M equivalent investment from the auto giant.

“The USD 90MM equivalent investment in our company by automotive giant Stellantis comes with the mandate to accelerate exploration at our core projects, with the aim of advancing to the assessment of development potential as quickly as possible,” said Nikolaos Cacos, CEO of Argentina Lithium. “We anticipate increasing the scale and number of our exploration programs as permits are received for our projects. This is a big undertaking, and we are now well financed to aggressively move forward with this work.”

According to the company, the Rinconcita II property extends Argentina Lithium’s holdings eastwards over the salt flat that has not previously been explored. The current drill program is intended to verify the presence and lithium grades of these brines, in order to incorporate them into the resource model they’re building for Rincon West.

Within the Argentina portion of the prolific Lithium Triangle, the mega-merger between Allkem Limited (TSX:AKE) (OTC:OROCF) and Livent Corporation (NYSE:LTHM) is set to reshape the lithium landscape to create the world’s third largest lithium miner by production capacity. Now that all competition and foreign approvals have been acquired, there is a lot of momentum behind the $10.6-billion merged entity.

“It really comes down to one key point which is: Our customers need us to get bigger,” said Livent CEO Paul Graves, who will lead the new entity. “They need more lithium, and developing lithium resources is not a game for small companies.”

According to Graves, combining Allkem and Livent should create a company with greater scale, a larger product range and a wider geographic footprint to meet the growth in lithium demand. This results from putting together Livent’s expertise in lithium processing, with Allkem’s large resource base and skill set in producing lithium using both brine-extraction and hard rock mining techniques.

Now with the entry of Tecpetrol into the space through the successful takeover bid of Alpha Lithium Corporation there’s another major player in the scene. In the wake of the takeover’s conclusion, Alpha announced it had completed drilling two wells on one of its existing properties in Hombre Muerto. Both wells encountered multiple brine bearing zones and, as they were both drilled as producing wellbores, are currently being flow-tested. Samples from each well were collected during initial pumping, serving as composite chemistry for the entire screened interval of the well and are more representative of the chemistry that would be expected from that well during production pumping.

Moving forward, in the near term, shareholders of ALLI have an expiry time of October 31, 2023 to tender their shares if they want to sell to Tecpetrol. As of the timing of the announcement, there are already 102,692,615 common shares bought out by the buyer, which leaves the market with a potential spot cash injection for those previous lithium stock owners to move to new projects with similar future takeout potential.

Source: https://usanewsgroup.com/2023/10/18/the-lithium-race-to-power/

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