Two of the red-hot lithium sector’s key players are poised to merge in a $700 million union that will consolidate ownership of the nation’s newest lithium mine.
Galaxy Resources and General Mining, who are joint venture partners in the Mt Cattlin lithium operation in Western Australia’s south west, simultaneously entered trading halts on Thursday.
Galaxy, the bigger of the two, said the halt was in relation to an acquisition while General said it was preparing to announce “a potential corporate control transaction”.
The two have a combined market capitalisation of around $700 million, with both stocks having appreciated by around 1400 per cent over the past year on the back of the boom in lithium stocks.
Galaxy and General started production at Mt Cattlin at the end of March, and the pair earlier this month signed off on a final offtake agreement with Japan’s Mitsubishi Corp and an unnamed customer.
General is headed by executive chairman and noted deal-maker Michael Fotios, who was instrumental in the early growth of gold producer Northern Star Resources.
A union between the pair would deliver obvious administrative cost savings but also simplify the ownership structure at Mt Cattlin.
Prices for lithium have risen sharply over the past year on the back of expectations for rising demand. Lithium is a core ingredient in the new-generation batteries used in electric vehicles and home energy storage systems pioneered by the likes of Tesla.
While the lithium market is tipped to remain in deficit for the next few years, there are concerns that a supply response could lead to a surplus by the end of the decade. Lithium market heavyweight FMC Corp this week announced plans to treble its lithium production by 2019, making it the third global lithium major to flag production increases.
GMM Price at posting:
61.5¢ Sentiment: None Disclosure: Not Held
