Galaxy Resources to Buy General Mining in Lithium Takeoverby
Project developers race to deliver new supply as demand booms
Companies see merger supporting plans to expand production
Galaxy Resources Ltd., an Australian lithium developer, agreed to acquire joint-venture partner General Mining Corp. in a deal that values its target at A$216 million ($155 million). Shares in the two companies surged.
Perth-based Galaxy offered 1.65 new shares for each General Mining share it doesn’t already own, it said in a statement Monday. The boards of both companies unanimously support the merger, according to the statement. The combined entity will have hard-rock and brine-based lithium projects in Australia, Canada and Argentina.
Developers of lithium projects are racing to bring new supply to market amid soaring prices. Growth in electric vehicle sales is forecast to double demand for the material in the next five years, Liberum Capital Ltd. said in a May 27 note. Production in China of electric vehicles, which use lithium ion batteries, rose more than 280 percent in 2015, according to Citigroup Inc. on May 9.
General Mining was seeking to begin exports of the lithium-bearing mineral spodumene from Western Australia’s Mt. Cattlin project as soon as July, its chairman Michael Fotios said in a February interview. The company has a 14 percent stake in the project, with Galaxy holding the remainder, Galaxy said in an April presentation.
“Our ability to capture future growth opportunities in the rapidly evolving lithium market will be significantly enhanced by this merger,” Fotios, who will become a director of the new company, said in the statement Monday. Galaxy’s managing director, Anthony Tse, and chairman, Martin Rowley, will assume the same positions in the enlarged entity.
Prices of lithium carbonate may stabilize from the second half as new supply comes online, Citigroup analysts including Jack Shang wrote in the May report. Global output may exceed 460,000 metric tons a year in 2020 if all slated projects proceed, compared to production of 189,000 tons last year, the analysts wrote.
Galaxy advanced 11 percent in Sydney trading to 44 Australian cents, while General Mining rose 15 percent to 71 cents.