Lithium miners combine $ 3.1 billion in electric vehicles as fuel demand
Australian mining groups Orocobre and Galaxy Resources are expected to sign a $ 4 billion ($ 3.1 billion) deal that would create one of the world’s largest lithium producers, as the demand for electric vehicles increases and turbocharges metal prices.
Companies listed by the Australian Securities Association said on Monday that the combined business would establish a diversified production base across Australia, South America and Canada, as well as boost the groups ’financial power and ability to grow faster.
Together, Brisbane-based Orocobre and Perthe headquarters would be the fifth largest producer of lithium in the world, an important material. batteries for electric vehicles. Both companies say they have the potential to expand their annual production of lithium carbonate, a processed form of raw material used in batteries, between 40,000 and 100,000 tons in the coming years.
“The transaction will allow the team to materially accelerate the development of combined growth projects,” Simon Hay, CEO of Galaxy, told investors. “And that growth is perfect for increasing the demand generated by our customers.”
Shares of Orocobre rose nearly 5 percent after the announcement of the deal, while shares of Galaxy increased by 2.7%.
Between them, Galaxy and Orocobre are planning major development projects, including Olaroz and Sal de Vida in Argentina and James Bay in Canada, which analysts predict will require more than $ 1 billion in capital spending.
The merged company would be headquartered in Argentina, Orocobre operates the Olaroz lithium facility and will have $ 487 million in its balance sheet.
“The combined entity will materially increase liquidity and improve access to capital, which we consider an important enabler for accelerated growth plans,” said Reg Spencer, an analyst at investment bank Canaccord Genuity.
Canaccord said it will look at renewing current production forecasts for the two companies in 2025 by 2025 liters of carbonate in 2025 if the merger goes ahead.
The global lithium market has retreated after two years of low prices due to the proliferation of supplies due to the proliferation of mines.
Lithium carbonate prices have risen about 70 percent this year with high demand for electric vehicles, according to Macquarie. The bank expects a further increase of 30-100 per cent over the next four years electric vehicles begin to move about 1 billion in the world’s internal combustion engines.
“The stringent demand for our electric vehicles sees the lithium market moving [a] deficit in 2022 creating a shortage of material from 2025, ”Macquarie said in a recent note.
According to the merger approved by the management of the two companies, Galaxy shareholders would receive 0.57 Orocobre shares per Galaxy share. Orocobre’s shareholders would own 54.2 percent of the combined entity, and Galaxy investors will own the rest. The merger is subject to shareholder approval.
Martín Pérez de Solay, General Manager of Orocobre, will lead the combined team. He will become president of the international business of the joint venture Galaxy’s Hay and will report to De Solay.
“The company will have a very strong balance sheet, which will allow us to borrow everything needed to develop projects. . . quickly, ”de Solay said.