Lithium M&A: Galaxy/Lithium One merger completed

 

Consolidation Potential for Lithium Juniors GXY.ax, LI.v, ILC.v, ORE.ax, RM.v

  "We have been talking here about the security of supply of strategic commodities for quite a while. All major players in Lithium batteries market prefer to keep chips close and bought strategic stakes in lithium developers. Now we have a consolidation in Lithium junior miners started by Galaxy Resources. From the four Lithium darlings we are following here: International Lithium, Rodinia Lithium, Lithium One and Orocodre - Lithium One is taken out now.

James West - the founder of Midas Letter - still has his golden touch.

James West has been talking about Lithium One and International Lithium in his recent Energy Report and now one of his picks in this sector is bought out.

Galaxy move will add Lithium and Potash brine in Argentina to the portfolio of hard rock mining lithium in Australia, lithium chemical plant in China and lithium battery plant in the making in China as well. Can we talk about vertical integration in the Lithium industry already now?"
 
Mining Weekly:

Galaxy/Lithium One merger completed

PERTH (miningweekly.com) - The merger between ASX-listed Galaxy Resources and TSX-listed Lithium One has now been successfully completed, and an application has been filed to de-listed the common shares of Lithium One from the Canadian board.

Galaxy MD Iggy Tan said on Wednesday that Galaxy had now boosted its global lithium resource base and had become a major global lithium company with assets in Australia, China, Canada and Argentina.

“Galaxy will require more lithium resources over the next few years, and Sal de Vida, along with James Bay, has added to our existing Australian resource inventory. Together with our China processing assets, we now have ample resource to continue to grow the lithium business and drive the long-term value of the company.”

Tan noted that with Galaxy’s expertise across project development and lithium mining, processing and marketing, the company would be able to fast-track the development of the Sal de Vida operation, as it did at the Mount Cattlin lithium mine and the Jiangsu lithium carbonate plant.

The Sal de Vida lithium and potash brine project, in Argentina, has the potential to produce some 25 000 t/y of lithium carbonate and 107 000 t/y of potash."
 

Lithium and Potash Brine production from Salars in South America

  

Extensive High-Grade Potash Discovery at International Lithium's Mariana Brine Project ILC.v, TNR.v

"Vancouver B.C.: International Lithium Corp. ("ILC" or the "Company") is very pleased to announce the discovery, through drilling, of the extensive distribution of high grade potash at its 100% owned, Mariana brine project located at Salar de Llullaillaco in the province of Salta, northwestern Argentina. The results demonstrate significant, consistent grades of potassium, with strong lithium and boron upside potential, remaining open at depth, in all four holes drilled.

Key Highlights:

• The highest grades of potash reported in an Argentine Salar;
• High potash values continue from surface to bottom in all holes;
• Potash, lithium and boron grades are open at depth.
"We are very encouraged with the results from the Phase 1 resource delineation drilling at Mariana that confirmed our belief in the potential of this multi-commodity potash-lithium-boron brine project. The observed extent of high grade potash brine encountered provides ILC the support and confidence to continue to advance our plans towards development. The objective for the next stage of exploration is to complete the remaining 10 to 12 holes needed for delineation drilling in conjunction with hydrogeological testing required to produce a reportable resource. Drilling will be designed to test structures that may control higher grade potash, lithium or boron zones" states Kirill Klip, President of the Company."

  It is time for us to look more closely at the Lithium and Potash brine production from Salars in South America. We will put together some initial information for your personal entertainment. Rick Mills will be the very good start. He is one of the pioneers covering strategic commodities: Lithium, REE, Graphite and Potash.

Brine Mining the Puna for Potash and Lithium.

Lithium ABC

Potash And Agriculture Investments: Potassium Fertiliser Production and Technology

Good overview of the world wide 58 million tons and 30 billion dollars in sales Potash market from Potash Corp.

Goldman Sachs Sixteenth Annual Global Agriculture Biotech Forum

Our five primary global markets — China, India, other Asia, Latin America and North America — combine to account for nearly three-quarters of the world’s population and roughly 80 percent of total fertilizer consumption.

Most of the growth in the fertilizer industry is occurring in these markets, with the exception of the more agriculturally-advanced North American market where sales are historically more stable. Consumption has increased by 83 percent in China, India, other Asia and Latin America over the past 20 years, closely matching food production trends in that time.

Market fast facts

China

• Population 1.4 billion
• Uses more fertilizer than any country accounting for 30 percent of world consumption
• Per capita renewable water resources are well below global average levels
• Has an increasing urban population with a rising standard of living
• Domestic consumption of meat has risen nearly seven-fold in 30 years, while fruit and vegetable consumption is nearly 10 times what it was 30 years ago
• Government has targeted improved agricultural productivity by modernizing equipment and practices, increasing farmer subsidies, allowing transfer of land-use rights, and raising minimum prices for key commodities
• Imports approximately 80 percent of its soybean requirements, a factor driving growth in Brazil and US production
• Limited domestic potash production capability — historically 75 percent of potash is imported

Top

India

• Population 1.2 billion
• 18 percent of world population but only 11 percent of its arable land
• Second largest fertilizer consuming country with around 16 percent of world use
• Annual fertilizer consumption growth of 4.8 percent this decade
• Government heavily subsidizes fertilizer for farmers to stimulate yield improvements
• Yields typically 20-50 percent of those on equivalent US cropland
• Government has set an agricultural sector growth target of 4 percent per year until at least 2012
• Per capita renewable water resources are well below global average levels and farmers are heavily reliant on seasonal monsoon rains to support crop production
• Has no indigenous potash
• Very poor nutrient balances in India’s soils, insufficient potash applied relative to nitrogen and phosphate, and more than 70 percent of soils have low to medium potassium content

Top

Other Asia (excluding China and India)

• Population 1.6 billion (combined)
• Account for approximately 12 percent of world fertilizer consumption
• World’s leading producer of oil palm, rubber and a major producer of rice
• Abundant water resources but limited per capita arable land
• Indonesia and Malaysia have more than doubled palm oil production in 10 years
• Has no indigenous potash

Top

Latin America

• Population 596 million
• Account for approximately 12 percent of world fertilizer consumption
• Abundant land, water and labor make it an agricultural superpower
• Produces about 60 percent of global coffee supply and approximately half of the world's soybeans and sugar
• Corn is also grown for export and to feed domestic livestock industry
• Soils in Brazil are naturally deficient in potassium and require potash to remain productive
• Limited domestic potash production capability — approximately 80 percent of potash is imported

Top

North America (US and Canada)

• Population 347 million (combined)
• Account for approximately 14 percent of world fertilizer consumption
• Major suppliers of food and fiber
• US accounts for about more than one-third total global trade in wheat, corn, soybeans and cotton
• Both countries are among the world’s most efficient agricultural producers
• Rising global food demand and domestic biofuel mandates have created competition for limited farmland

  SQM is one of the Big Four in Lithium production and the largest producer of Lithium and Potash from brines in the world.

"CITI   SQM - Soc. Quimica y Minera de Chile (SQM)

Potash Fundamentals Remain Attractive LT — With grain prices showing solid gains YTD (soybeans +13%, corn +4%), 2012 is expected to be the 2nd most profitable year for farmers (after 2011) – positive for fertilizer application as farmers look to maximize yields. While potash demand experienced a slowdown in 2H11, increased supply discipline in 1Q12 has begun to balance the market. Evidence of better potash fundamentals should arise from current Chinese contract negotiations (no settlement reached yet), which will provide a floor and certainty to buyers in Asia, Brazil and India."

SQM Corporate presentation.

  FMC is another one from Big Four Lithium producers - producers Lithium and Potash from Hombre Muerto in Argentina.

FMC Corporate presentation.

Please, do not forget, that we own stocks we are writing about and have position in these companies. We are not providing any investment advise on this blog and there is no solicitation to buy or sell any particular company here. Always consult with your qualified financial adviser before making any investment decisions.

Lithium developers we are following here.

  Chinese Ganfeng Lithium - strategic partner with ILC - owns 15% of the company now, results were just released from its Phase 1 resource delineation drilling program at Mariana salar in Argentina.

International Lithium Corporate presentation.

  Chinese Shanshan is among the investors in Rodinia Lithium.

Rodinia Lithium Corporate presentation.

  Lithium One is being bought out by Galaxy Resources now. 

Consolidation Potential for Lithium Juniors GXY.ax, LI.v, ILC.v, ORE.ax, RM.v

Lithium One Corporate presentation.

  Japanese Toyota Tsusho is strategic investor in Orocobre.

Orocobre Corporate presentation.

Consolidation Potential for Lithium Juniors GXY.ax, LI.v, ILC.v, ORE.ax, RM.v

 

  We have been talking here about the security of supply of strategic commodities for quite a while. All major players in Lithium batteries market prefer to keep chips close and bought strategic stakes in lithium developers. Now we have a consolidation in Lithium junior miners started by Galaxy Resources. From the four Lithium darlings we are following here: International Lithium, Rodinia Lithium, Lithium One and Orocodre - Lithium One is taken out now.

James West - the founder of Midas Letter - still has his golden touch.

James West has been talking about Lithium One and International Lithium in his recent Energy Report and now one of his picks in this sector is bought out.

Galaxy move will add Lithium and Potash brine in Argentina to the portfolio of hard rock mining lithium in Australia, lithium chemical plant in China and lithium battery plant in the making in China as well. Can we talk about vertical integration in the Lithium industry already now?

Reuters Insider: International Lithium Corp. Video on Midas Letter with James West ILC.v, TNR.v

International Lithium Corp. Video on Midas Letter with 

James West

Business Insider:

Consolidation Potential for Lithium Juniors

Resource Investing News

By Dave Brown — Exclusive to Lithium Investing News

Last week, Galaxy Resources Ltd. (ASX:GXY) acquired Lithium One Inc. (TSXV:LI) in a friendly deal for approximately $112 million. The acquisition provides Lithium One shareholders with 1.8 Galaxy shares per common share in an all-share deal that implies a 27 percent premium for Lithium One shareholders on a 30-day volume weighted average price basis. It will be interesting to observe the perception of the deal from the market, as Galaxy has requested the suspension of trading preceding an announcement to raise capital.

Galaxy owns the Mount Cattlin hardrock lithium mine in Australia and a lithium carbonate processing plant in China. The company, which has indicated a production capacity of 17,000 tonnes a year, has off-take agreements with Mitsubishi Corp. (TYO:8058) in addition to Chinese battery manufacturers. Lithium One owns the James Bay hardrock project in Quebec, in which Galaxy already held a 20 percent stake, along with the Sal de Vida brine project in Argentina.
Potential risk of dynamic policy

Last week, representatives of 33 indigenous communities living in the Northern Argentinian provinces of Jujuy and Salta turned to the Supreme Court to claim their right to be consulted for exploration and development of lithium projects. This move comes following last year’s declaration by the governor of Jujuy Province that lithium is a strategic mineral under Decreto 7592/11, asserting that all present and future lithium projects must be studied by a special expert commission before being approved by local and national authorities.

It is of interest for investors to note that Galaxy and Lithium’s Sal de Vida project is located in the neighboring  province of Catamarca, while Orocobre Ltd. (ASX:ORE,TSX:ORL) has operational exposure in the Salta region.

Recent historical context

Over the course of last year, a number of lithium exploration and development companies engaged in strategic alliances with consumer electronics companies, industrial conglomerates, and battery manufacturers in order to develop lithium resources. There have also been cooperative ventures between electric vehicle initiatives, automotive and battery manufacturers, universities, and governments to further prospective development and research.

A report from Ernst & Young showed that strategic merger and acquisition activity focused on simultaneously driving down operational costs and achieving growth. Sensible, lower-risk transacting was at the top of the agenda. Outside of the lithium industry, these factors gave rise to an increase in large-scale domestic consolidations, offering the promise of synergies and operations in a familiar environment. These deals provided a low-risk way to achieve growth and leverage existing knowledge or positions in the market.

According to the report, approximately 2.6 percent of the mining and metals merger and acquisition activity last year occurred in the rare earth and lithium sectors.

Geopolitical considerations

Potential positive implications of Chile’s recent policy provision for lithium extraction may help to foster additional merger and acquisition activity within the junior mining sector. The most attractive targets will likely be those with exposure to advanced-level projects in jurisdictions that have favorable operating environments. Direct consolidation between lithium exploration companies and lithium producers could mean additional investment interest as opportunities may look more worthwhile for investors.

Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.

Please, do not forget, that we own stocks we are writing about and have position in these companies. We are not providing any investment advise on this blog and there is no solicitation to buy or sell any particular company here. Always consult with your qualified financial adviser before making any investment decisions.