Technology Metals Australia (ASX:TMT) and Australian Vanadium (ASX:AVL) have agreed to a $217 million merger in a synergistic bid to become Australia’s first operating primary vanadium producer.
The companies will merge via a proposed scheme of arrangement under which Australian Vanadium will acquire 100% of the Technology Metals shares on issue.
Under the terms of the scheme, each Technology Metals shareholder will receive 12 Australian Vanadium fully paid ordinary shares for every fully paid ordinary TMT share held at the scheme record date. If the scheme is approved and implemented, existing AVL shareholders will hold 58% of the combined group and existing TMT shareholders will hold 42% of the combined group (prior to any dilution associated with the proposed placement).
The consolidation of 2 adjoining projects across one orebody enables the opportunity to realise operational and corporate synergies by creating a single integrated project, both companies say. Once combined, the group will be host to a ‘world-class’ asset of scale, located in a tier-one mining jurisdiction.
Australian Vanadium is advancing the development of its namesake Australian Vanadium Project at Gabanintha. VSUN Energy is the company’s 100% owned renewable energy and energy storage subsidiary which is focused on developing vanadium flow batteries for long duration energy storage for the Australian market.
Technology Metals’ 100% owned Murchison Technology Metals Project (MTMP) is expected to meet global demand for high-purity vanadium, increasingly recognised as a critical mineral
around the world.
Both companies report the rationale for the tie-up include enhanced project economics and expansion optionality; material synergies, improved funding capabilities; increased market relevance and liquidity; and consolidation of skillsets.
As part of the transaction, Australian Vanadium is undertaking a placement to raise a minimum of $15 million, comprising the issue of some 576.9 million new shares. The new shares will be issued at a price of $0.026, which represents a 3.7% discount to the closing price at which AVL shares traded on Friday 22 September 2023.
Proceeds from the placement will be applied to support project integration strategy, fund ongoing project, and corporate initiatives and general working capital and transaction costs.
Macquarie Capital (Australia) and Canaccord Genuity (Australia) are acting as joint lead managers and joint bookrunners to the placement.
Technology Metals’ board has recommended shareholders vote in favour of the merger
Technology Metals’ board has recommended shareholders vote in favour of the merger.
The company’s major shareholder Resource Capital Fund VII LP (RCF), which holds 18% of shares on issue, says its intention is to vote in favour of the scheme, in the absence of a superior proposal (as assessed by RCF) and subject to an independent expert opinion.
Assuming completion of the scheme and the placement, RCF would emerge as the largest shareholder of the combined entity, holding some 17.6%.
Technology Metals will seek court approval to convene a meeting of shareholders to approve the scheme. A scheme booklet is expected to be circulated to all shareholders in November 2023.
Australian Vanadium’s financial advisor for the transaction is Macquarie Capital and its legal advisor is Corrs Chambers Westgarth. Technology Metals has retained financial advisors Sternship Advisers and Argonaut PCF and its legal advisor is DLA Piper.
Technology Metals Managing Director Ian Prentice says the company is excited to be proposing the consolidation of the Gabanintha vanadium orebody, which he says is arguably one of the best undeveloped vanadium resources in the world, to create a larger vanadium development company with potential to be the world’s next primary vanadium producer.
“This all comes at a pivotal time for the global vanadium industry as vanadium flow batteries are established as a critical player in the long duration energy storage market, a key requirement for the world’s transition to net zero and a cleaner future.
“This all comes at a pivotal time for the global vanadium industry as vanadium flow batteries are established as a critical player in the long duration energy storage market, a key requirement for the world’s transition to net zero and a cleaner future“
We very much appreciate our major shareholder RCF’s demonstrable support for the vanadium thematic and the development of this world class asset.”
Prentice to join Australian Vanadium’s executive management team and will be initially focused on the integration of the 2 adjoining projects.
Australian Vanadium CEO Graham Arvidson says the combination is transformational for both companies and marks a significant milestone in both management teams’ efforts to develop their respective projects.
“The logical consolidation of two adjoining projects on the same orebody will unlock material synergies for both sets of shareholders. If successful, the transaction will create the leading ASX listed vanadium developer and a world-class asset of scale located in a tier-one mining jurisdiction. AVL’s institutional placement ensures that the combined group will be well-funded to progress integration and the go-forward development strategy.
It is our opinion that RCF’s strong support for the placement highlights their long-term backing of the combined business as well as a broader view on the strengthening vanadium thematic. The transaction will leverage the best of both organisations, including best in class technical work, assets, and people, and will result in AVL becoming the leading force in the Australian vanadium sector.”
The combined group will continue to trade as Australian Vanadium on the ASX.
Write to Adam Orlando at Mining.com.au
Images: Technology Metals Australia & Australian vanadium