A small Vancouver-based mining company with mining rights to one of the largest undeveloped lithium deposits on Earth has become the focus of an unexpected bidding war.
Lithium Americas Corp. on Monday made a $ 400 million offer for shares and cash in the US-based Vancouver-based company Millennial Lithium Corp., which trumps an earlier offer for the company from China’s Contemporary Amperex Technology Co. Ltd., or CATL.
Millennials’ most important asset is its stake in the lithium mine Pastos Grandes in Argentina. Ultralight lithium is a key component in batteries for electric cars, the demand for which is exploding right now.
The Argentine project is believed to have enough lithium to produce 24,000 tons per year of battery-quality lithium carbonate for 40 years.
The new offer of $ 4.70 per. share trumps $ 3.85 per share.
As things stand, the world does not produce enough lithium to make all the batteries required to meet commitments from automakers to electrify their fleets.
‘No geopolitical angle at all’
CATL’s $ 3.85 bid for the company in September was not the first Chinese overture for the company, as it beat a previous takeover bid of $ 3.60 per share in July from another China-based firm, Ganfeng.
The higher offer will no doubt come as some relief to Ottawa politicians, who would otherwise be forced to decide whether the offer from China-based CATL should be allowed to continue for national security reasons.
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 Vancouver airport, Ottawa moved to block another Chinese takeover of a Canadian miner, TMAC Resources, which has gold mines in northern Canada.
“There’s no geopolitical angle at all,” Lithium America CEO Jon Evans said of his firm’s offering. “We are solely looking at this as an exciting future.”
While the marriage between two Vancouver-based miners appears to be ideal at first blush, analyst Craig Hutchison at TD Bank suggests the story may not be over yet.
“CATL has a market capitalization of about $ 238 billion and is one of the largest battery manufacturers in the world,” he said in a note to customers. “Therefore, we believe that there is a possibility of a higher bid.”
Investors also seem to think it’s a possibility when shares of Millennial Lithium traded above the $ 4.70 offer price on Tuesday, a sign that they believe a higher offer may come.