There continues to be plenty of action from Alliance Mineral Assets (AMA) and its JV partner, Tawana Resources, with their lithium mining project in Western Australia being the prized trophy.
@ Bald Hill Project where AMA and Tawana are in a JV to produce lithium. Photo: CompanyHK-listed Burwill Holdings, to backtrack a little, announced on 4 Oct 2017 that it would take a 13.54% stake in AMA for A$19.575 million. This will be done through the issue of new AMA shares at 27.8 Singapore cents a share.
(Burwill, in case you have not been following, had signed on in April 2017 to be the offtaker for at least US$200 m worth of lithium concentrate from the Bald Hill mine of AMA.)
So Burwill is a deep strategic investor.
Now, there are "a number of parties" who want to party too: Last night (19 Oct), AMA announced it "has been approached by a number of parties to explore potential transactions which may involve ordinary shares of the Company."
Coincidentally last night, Reuters and CNBC reported that Tawana Resources had attracted China's Jiangxi Special Electric Motor Co Ltd as a 11.45% shareholder for A$20 million (or 35 Aussie cents per Tawana share).
This morning, Tawana announced the deal.
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So the field is thrown wide open for speculation on who the "other parties" might be who are interested in acquiring equity stakes in AMA.
1. Automakers? There is no shortage of automakers with plans to roll out electric vehicles in the near future and they are realising it would be advantageous to secure supplies of lithium for their batteries.
Three weeks ago (28 Sept), China's largest automaker, Great Wall Motor, announced it would take a 3.5% stake in Aussie lithium miner Pilbara Minerals for A$28 million.
The two companies also signed an offtake agreement.
With regards to AMA's Bald Hill mine supply, automakers are too late: Burwill has locked in not just a minimum supply through 2018-2019 but has also the first right of refusal for excess lithium concentrate produced in those years. Burwill has exclusive rights to the lithium concentrate for a five-year term and pre-emptive rights to the same for the subsequent five years.
Automakers may negotiate for a pure equity stake in AMA but sorry, no lithium supply.
2. Downstream players? This is exactly the case with China's Jiangxi Special Electric Motor Co which produces lithium batteries and electric vehicles.
Last night (19 Oct), it said its German division had agreed to pay A$20 million ($15.72 million) for an 11.45-percent stake in Tawana Resources. See CNBC report here.
Jiangxi already has a prior connection with the Bald Hill project: It has a 50-50 JV with Burwill to engage in the processing of lithium concentrates and sales of the resulting products, lithium carbonate and lithium hydroxide.
Thus, other downstream players are too late in the game with respect to supplies from the Bald Hill mine. Downstream players may negotiate for a pure equity stake but sorry, no lithium supply.
3. Temasek Holdings? The Singapore investment arm could eye AMA because it is a value play available in S$ and listed in Temasek's own backyard. There's some credence to this going by some chatter in online forums about AMA courting Temasek many months ago.
4. Tawana Resources? The JV partner could be interested in getting married to AMA, and vice versa. This marriage would have the blessing of investors: Now and then in the past year, the marriage has been suggested/recommended by investors on the Australian stock forum, HotCopper.
It's easy to make a case for it: The combined entity has a larger market capitalisation that would attract big fund investors; it would save operating costs; it would enable decison-making to be more efficient, etc.
There has been a precedent in the lithium scene in Australia: In May 2016, Galaxy Resources merged with General Mining, its JV partner in the Mt Cattlin lithium mine in Western Australia.
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Alliance Mineral Assets
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Tawana Resources
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Stock price
(19 Oct 17)
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S$0.35
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A$0.36
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Market cap
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S$168 m
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A$159 m
(S$170 m)
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Bald Hill Project
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50% rights to lithium; currently 100% rights to all other minerals
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50% rights to lithium; currently earning in 50% rights to all other minerals (through $12.5 m capex expenditure)
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Other assets
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• Cowan lithium project
• Yallari lithium project
• Mofe Creek Project (iron ore)
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Galaxy Resources offered 1.65 of its shares for each General Mining share.
The combined group emerged as one of the Australian bourse's largest lithium players, with a market capitalisation of more than A$700 million. Today, it has gone up to A$1.6 billion.
On their current market caps, a Tawana-AMA merged entity would be worth S$340 million. Each one would be contributing almost equally, based on their recent stock prices of 36 AUD cents and 35 SGD cents, respectively.
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