They’re the majority owner of Australia’s most prestigious lithium-rich address, but IGO Group and Chinese company Tianqi are planning to invest $136 million to create another lithium province located in Western Australia.
The two companies, who have worked in partnership regarding lithium issues since late 2020, have agreed to spend $136 million to buy lithium explorer Essential Metals under a plan to gain a foothold in the area of lithium production in the region between Kalgoorlie in the Kalgoorlie region and Norseman.
Essential Metals has been drilling an early-stage deposit, known as Pioneer Dome, which is some years away from being developed, and would only be a tiny step to IGO and Tianqi within the context of their 51 percent stake in Australia’s largest and best lithium mine in Greenbushes.
Greenbushes could last for at most 20 years. It is located approximately 600 kilometers away from Pioneer Dome as the crow is flying, which suggests that Monday’s purchase could be about IGO and Tianqi’s plan to establish an entirely new lithium province instead of merely extending or increasing the size to expand the Greenbushes hub.
Existing lithium mines are already operating near Pioneer Dome; the Mt Marion mine Chris Ellison’s Mineral Resources shares with Chinese company Ganfeng is located about 75 kilometers north.
However, perhaps more significantly than that, Bald Hill is the Bald Hill mine for lithium lies located about 60 km northeast of the tenements, and its future is still in uncertain times. Bald Hill has been in the administration since August 2019, when the proprietor Alita Resources collapsed.
A proposal for the sale of this mine to a Chinese-owned company in 2019 did not receive the approval of Australia’s Foreign Investment Review Board.
Receivers attempted in the future to transfer the mining to the US-registered Austroid which shared relations with the Chinese company that was part of the failed deal. The Morrison government was not able to consider Austroid’s request and Austroid filed an updated FIRB application last year to an incoming Labor government to look at.
According to the latest disclosures made on the Singapore exchange made by Alita in addition to disclosures for the Australian Securities and Investments Commission (ASIC) by the receivers McGrathNicol, the transfer of the Bald Hill mine to Austroid hasn’t yet received the final approval of the FIRB.
The agreement for sale has the date of sunset on January 31, which suggests IGO and Tianqi’s move into the lithium market may be a good time to do so.
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Essential Metals Directors have unanimously urged shareholders to support the deal that would see IGO as well as Tianqi pay 50 cents/for every Essential share. The offer comes at the equivalent of a 36.3 percent increase over Essential’s share price over the recent 40 days. Essential shares sold for 21C/ at this time last year, and the stock was at 9C during June of 2021.
The joint venture for lithium that is owned by IGO and Tianqi has 51 percent ownership in the Greenbushes mine and US producer Albemarle has the remaining 49 percent of the mining. The situation is Tianqi effectively holds 26.01 percent in the Greenbushes mine, whereas IGO holds 24.99 percent. They also share a lithium hydroxide production plant to the south of Perth in Kwinana which is where concentrations of lithium taken from Greenbushes are transformed into a higher-value lithium hydroxide to be used in batteries.
IGO holds 49 percent of the Kwinana plant, while Tianqi holds the remaining. The deal was struck when the car maker Maserati, Peugeot, Jeep, and Chrysler Stellantis Stellantis agreed to purchase manganese for battery grades from ASX-listed Element 25. The agreement will be a deal that would see Element 25 supply battery-grade manganese sulfate to the automaker over five years beginning in 2026 as long as Element 25 can build the Western Australian mine and American processing plant to provide the product. In exchange, Stellantis will subscribe for $115 million of Element 25 shares and provide another $US15 million in a pre-payment for manganese, which will be delivered in 2026.