China鈥檚听Ganfeng听Lithium, one of the world鈥檚 top producers of the battery metal, is going ahead with the takeover of听Bacanora听Lithium (LON:听BCN) as听the听Mexico-focused听explorer and developer听has听accepted听听(about $391m)听cash offer.听
Ganfeng听increased its original bid,听submitted in early May,听to 73.6 pence per Bacanora share in cash and听Germany-focused听Zinnwald听(LON: ZNWD)听shares,听in which Bacanora holds a 36% stake. This听compares with听Ganfeng鈥檚听previous offer of 67.5 pence per share in cash.听听
As part of the deal, Bacanora听shareholders will be entitled to receive 67.5 pence in cash and a听distribution of听the UK-based miner鈥檚听stake in听Zinnwald听at a ratio of 0.23589听Zinnwald听shares for each Bacanora share.听
With the addition of those shares, the Chinese group鈥檚 offer represents a 63% premium to听Bacanora鈥檚听closing share price on May 5.听听
The deal hands China鈥檚 largest lithium producer control over the Bacanora lithium mine in Mexico
The听bid, which听would听add听the听Sonora project in Mexico to Ganfeng鈥檚 global portfolio of lithium assets,听comes as soaring lithium prices have triggered a wave of deals in the sector, including the听recent mega-merger听of Australia鈥檚 Galaxy Resources (ASX:听GXY)听and听Orocobre听(ASX:听ORE).听
Ganfeng鈥檚 improved offer has overcome a number of potential obstacles to a deal,听including听meeting all pre-conditions outlined in the May announcement听and securing Chinese听authorities鈥櫶齛pproval.听听
The deal still needs the support of shareholders owning more than 50% of Bacanora and the Mexican antitrust approval.听
Following the听original offer, a group of more than 400 investors听orchestrated听a campaign to block the deal, calling the offer derisory.听But the revised听bid听has the backing of M&G Recovery Fund, which holds a 14% stake in Bacanora, Ganfeng said.听
Prices for lithium in China听have jumped more than 100% so far this year, according to Benchmark Mineral Intelligence, on the back of an expected demand increase from the electric vehicles (EVs) sector.听
Ganfeng, which already had听a听50% stake in Bacanora鈥檚听Mexican听project, holds interests in mines in Australia, Argentina and Canada and around 70,000听tonnes听of lithium carbonate equivalent of annual conversion capacity in China.听
The Sonora mine, expected to begin production in 2023, will produce 35,000听tonnes听of lithium per year once at full tilt.听
Targeting hot spots听
Beijing announced last year a development plan for the so-called new energy vehicle (NEV) industry in 2021-35. It is targeting a 20% share of NEVs in the country鈥檚 total vehicles sales by 2025, which supports the demand for battery materials in the long run.听听
Gangfen听paid C$353 million听($278m)听in July for Canada鈥檚 Millennial Lithium, which has the听Pastos听Grandes听project in Argentina. The previous month it had听paid $130 million听for half the Goulamina lithium mine听in Mali.听
The Chinese miner is also advancing a planned C$353 million ($280m)听acquisition听of Argentina-focused听Millennial Lithium, which will give it听control听of听four of Latin America鈥檚 biggest lithium deposits, hosting combined lithium carbonate equivalent resources of 43.5听million听tonnes, based on听.听
Gangfend听is simultaneously听exploring听setting up a batteries plant听in Argentina, where is developing the听Cauchari-Olaroz听lithium brine project, in the country鈥檚 northwestern Jujuy province.听
An International Energy Agency (IEA)听report published听in May听recommended governments听to听start stockpiling battery metals, noting that lithium demand could increase 40-fold in the next 20 years. IEA executive director Fatih Birol said this would become an 鈥渆nergy security鈥� issue.听听
China dominates听lithium processing, while mine supply largely comes from听Chile and Australia, the two largest producing countries.听