Charger Metals (ASX:CHR) has attracted a suitor offering $6.5 million via an all-scrip deal while trying to secure better funding terms for its Bynoe Lithium Project in the Northern Territory.
Core Lithium (ASX:CXO), which has a market capitalisation of $198.7 million, has put forward an unsolicited non-binding, conditional, indicative offer of 0.9 Core shares for each Charger share held, which values the deal at $6.5 million, or $0.084 per share.
This represents a 23% premium to the closing price of Charger shares last Friday (16 August), or 35% higher than the five-day volume weighted average price (VWAP) for Charger and Core shares on the same date.
Prior to the news, Charger closed at just under $0.07. Shares have since advanced over 30% to an intra-day high today (19 August) of $0.089.
The junior explorer, which has a market capitalisation of $5.3 million, last year started investigating whether it could obtain better funding terms for its Lake Johnston and Bynoe Lithium projects from strategic investors.
The sharp decline in lithium prices since November 2022 has impacted equity markets, making it harder for companies to raise capital without having to do it at a heavy discount.
Charger says it has engaged with a number of companies interested in the company and its Bynoe Project.
The company agreed to share its technical data under non-disclosure agreements with a short list of interested parties to fund significant exploration programs at both the Lake Johnston and Bynoe Lithium projects.
In January 2024, Charger completed a farm-in agreement with Rio Tinto Exploration at Lake Johnston.
Rio Tinto Exploration can earn 51% by sole funding $10 million in exploration expenditure and paying Charger at least $1.5 million in cash. The company can then increase its stake to 75% by sole funding $40 million in exploration expenditure or completing a Definitive Feasibility Study.
But Charger says it so far has not received binding terms on a funding proposal for the Bynoe Lithium Project and negotiations are ongoing.
As part of this process, Charger has also been in talks with several parties concerning potential options for maximising shareholder value and retaining leverage to lithium prices going forward.
This resulted in the company receiving the offer from Core Lithium. However, the Charger board believes the offer does not fully reflect the company’s value and prospects.
The company says it remains open to continuing engagement with Core with the view to pursuing the best outcome for Charger shareholders.
Core has confirmed it made an offer for a merger of Core and Charger via a proposed scheme of arrangement, adding it then met Core to discuss the offer and subsequently increased the share consideration.
The suitor says the offer is a 47.5% premium to the closing of Charger shares on 24 July 2024, which is the last trading day before Core made its initial proposal, and a 44.1% premium to the five-day VWAP.
Core adds the proposal, should it proceed to a completed transaction, would also provide Charger shareholders with the ability to continue exposure to the lithium market through the assets of both companies and sell Core shares on market, to realise an attractive premium.
Charger, meanwhile, is also continuing talks with other parties.
In November 2022, China’s lithium spodumene averaged US$6,108 ($9,127) a tonne and the lithium hydroxide price averaged US$75,393 a tonne, according to the Australian Government’s June 2024 Resources and Energy Quarterly.
In May 2024, spodumene averaged US$1,220 a tonne, while the lithium hydroxide price averaged US$13,612 a tonne.
The Australian Government says that prices appear to have bottomed, after large falls in 2023 and early 2024.
However, it is expecting capital expenditure in the lithium industry to edge back after recent price declines.
“China’s lithium spodumene price is forecast to remain weak over H2 2024, averaging US$1,100 a tonne over the year, before picking up to US$1,300 a tonne by 2026,” the report says.
Write to Angela East at Mining.com.au
Images: Charger Metals
