A small Vancouver-based mining company with mining rights to one of the biggest undeveloped lithium deposits on Earth has become the focus of an unexpected bidding war.
Lithium Americas Corp. made a $400 million US stock-and-cash offer for fellow Vancouver-based company Millennial Lithium Corp. on Monday, trumping a previous offer for the company made by China’s Contemporary Amperex Technology Co. Ltd., or CATL.
Millennial’s main asset is its stake in the Pastos Grandes lithium mine in Argentina. Ultra-liight lithium is a key component in batteries for electric cars, demand for which is exploding right now.
The Argentinian project is believed to have enough lithium to produce 24,000 tonnes per year of battery-quality lithium carbonate for 40 years.
The new offer of $4.70 per share trumps the $3.85 per share offer for the company made by CATL, which is the world’s largest maker of lithium batteries and one of Tesla’s major suppliers.
As things stand, the world does not produce enough lithium to make all the batteries that will be required to meet commitments by automakers to electrify their fleets.
‘No geopolitical angle at all’
CATL’s bid of $385 million for the company in September was not the first Chinese overture for the company, as it bested a previous takeover offer of $3.60 a share in July from another China-based firm, Ganfeng.
The higher offer will doubtless come as some relief to politicians in Ottawa, who would otherwise be forced to decide on whether the offer from China-based CATL should be allowed to go ahead on national security grounds.
Last year, at the height of diplomatic tensions over Meng Wangzhou and the imprisonment in China of Michael Kovrig and Michael Spavor as a result of her detention at the Vancouver airport, Ottawa moved to block another Chinese takeover of a Canadian miner, TMAC Resources, which has gold mines in Canada’s North.
“There’s no geopolitical angle at all,” Lithium Americas CEO Jon Evans said of his company’s offer. “We purely look at this as an exciting future.”
While the marriage of two Vancouver-based miners would appear to be ideal at first blush, analyst Craig Hutchison at TD Bank suspects the story may not be over yet.
“CATL has a market cap of around $238 billion US and is one of the largest battery makers in the world,” he said in a note to clients. “Therefore we believe there is possibility of a higher bid.”
Investors seem to think that’s a possibility, too, as shares of Millennial Lithium were trading above the $4.70 offer price on Tuesday, a sign they think a higher offer may be coming.