Pilbara Minerals (ASX:PLS) has entered into a binding scheme implementation agreement to acquire Latin Resources’ (ASX:LRS).
As part of the proposed transaction, Pilbara Minerals, which has a market capitalisation of $8.57 billion, will secure Latin Resources’ flagship Salinas Lithium Project which has potential to become a top 10 hard rock lithium operation by production globally.
The project lies in the Minas Gerais region of Brazil, with development flexibility to supply new markets.
Under the binding SIA, Latin Resources shareholders will receive 0.07 shares in the new merged company for each Latin Resources share held, and will also own about 6.4% of Pilbara Minerals shares upon implementing the scheme.
Based on Pilbara Minerals’ closing price of $2.85 per share on 14 August 2024, the transaction implies a value of $0.20 per Latin share, representing a 57% premium to the company’s 10-day volume weighted average price of $0.127 per share.
Latin Resources intends to dispatch a Scheme Booklet containing further information in relation to the
Scheme to Latin Resources shareholders in mid-October 2024. The Scheme Meeting is expected to be held in mid-November 2024 and, if approved by Latin shareholders and the Court, the Scheme is expected to be implemented in late November or early December.
Pilbara Minerals has appointed Barrenjoey as its financial advisor and Corrs Chambers Westgarth as its
legal advisor in relation to the scheme. Latin Resources has appointed Macquarie Capital (Australia) as its financial advisor and King & Wood Mallesons as its legal advisor.
In an announcement today, both companies say Latin Resources shareholders will benefit from an immediate premium and unlock Salinas’ value by de-risking funding and development through leveraging Pilbara Minerals’ proven experience in developing and operating hard rock lithium projects, while also receiving immediate exposure to lithium production from the Pilgangoora operation.
The company adds that the Salinas Project has the potential to make a “significant” contribution to the pro-forma Pilbara Minerals by adding 20% to its mineral resources and up to 30% of pro-forma steady-state production upon the project achieving steady-state production at a cost base that is expected to be competitive with Pilgangoora.
Pilbara Minerals CEO Dale Henderson says the acquisition is on-strategy, diversifying the business with what is believed to be a counter-cyclical, accretive extension that builds out the company’s position as one of the “leading” lithium materials suppliers globally.
“The acquisition will deliver our second 100% owned, tier one, hard rock lithium asset, which is expected to be low-cost and accretive for our shareholders,” Henderson says.
“It provides Pilbara Minerals with optionality to sequence new supply and diversify into new growth markets for lithium such as Europe and North America.
“The acquisition follows an extensive period of project assessment globally in which we rank Latin Resources’ Salinas Project at the top of our list when benchmarked holistically across a range of key criteria.”
Henderson adds that a comprehensive due diligence period has been conducted over the past six months to build out the company’s understanding of the Salinas Project and the region’s potential.
“Importantly, the acquisition leverages Pilbara Minerals’ capability in hard-rock lithium resource delineation, project development, operations and marketing experience,” he says.
Latin Resources’ board team has unanimously recommended the scheme in the absence of a superior proposal emerging.
Managing Director Chris Gale has also agreed to join Pilbara Minerals as a consultant for 12-months to provide leadership continuity with key stakeholders, including the Latin Resources in-country team, senior government officials, and local community representatives to progress key activities at Salinas.
Gale says after spending time with the Pilbara Minerals’ team and at the Pilgangoora Mine, there is no doubt that the company’s expertise in lithium mining will benefit Latin Resources, its Brazilian subsidiary Belo Lithium, and Brazil itself.
“In addition to delivering an attractive premium, this transaction allows Latin Resources shareholders to retain ongoing, but significantly de-risked, exposure to the development of Salinas as part of a larger, more diversified enterprise with a strong balance sheet, cash flow generation and technical expertise, all of which will support the successful development and operation of Salinas.”
Latin Resources is a Perth-based mineral explorer and developer focused primarily on the development of the Salinas Project in Brazil.
The global lithium demand is projected to rise by 17% a year between 2023 and 2026, driven by the increase in adopting EVs, as reported by the Department of Industry Science and Resources’ (DISR) latest Resources and Energy Quarterly for June 2024.
Global lithium supply rising will see the lithium market remain in surplus.
Write to Aaliyah Rogan at Mining.com.au
Images: Pilbara Minerals
