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IGO strikes A$1.9bn deal for Greenbushes and Kwinana plant

9th December 2020

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – ASX-listed Independence Group (IGO) has struck a A$1.9-billion deal with lithium producer Tianqi Lithium to acquire a significant stake in the Greenbushes lithium mining and processing operation, as well as in the Kwinana lithium hydroxide plant, both in Western Australia.

IGO will acquire a 49% interest in Tianqi Lithium Energy Australia through a share subscription, giving the company a 24.99% interest in the Greenbushes operation and a 49% interest in the Kwinana plant.

IGO MD and CEO Peter Bradford said on a conference call on Wednesday that the transaction would be "transformational" for IGO, and would deliver on the company’s strategy to become a global leader in the supply of metals critical for enabling a clean energy future.

“We see Tianqi, a leader in the global lithium industry and with strong alignment to our strategy, as the ideal partner for IGO. Both Greenbushes and Kwinana are world-class assets with attractive growth profiles that together provide the platform for building a global lithium business,” Bradford said.

The Greenbushes mine, some 250 km south of Perth, produced some 764 000 t of lithium concentrates in 2019, and is slated to produce between 510 000 t and 525 000 t of lithium concentrates for the 2020 year, while 2021 production is expected to reach between 850 000 t and 900 000 t.

The project currently has an operating life of some 20 years, with the potential to extend the mine life from the nearby Kapanga deposit, which is currently being evaluated.

US major Albemarle currently holds a 49% interest in the Greenbushes joint venture.

Meanwhile, construction of the first train at the Kwinana lithium hydroxide plant is complete, and the 24 000 t/y train will be ramped up by the fourth quarter of 2022.

The second train, delivering an additional 24 000 t/y of lithium hydroxide capacity, is some 20% to 30% complete, and commissioning is expected in 2024, with some $190-million of capital expenditure still remaining.

Bradford said on Wednesday that to date, some $700-million has been invested at the Kwinana refinery.

Furthermore, there was also the optionality to significant increase the total capacity at the Kwinana refinery with the addition of a third and fourth train in the future, which could potentially take the production capacity to 96 000 t/y.

Bradford on Wednesday said that the acquisition of a stake in the Greenbushes mine and the Kwinana refiner was consistent with the company’s stated strategy of becoming a globally relevant supplier of metals critical to clean energy, and provided the company with a number of benefits, including strong near-term production growth underpinning cash flow generation, long-term sustainable assets with significant growth optionality, a well-timed acquisition taking advantage of the low point in the lithium cycle, and a strong partnership with a world leading lithium industry participant.

FUNDING
IGO will fund the A$19-million cash consideration through a combination of A$1.1-billion in new senior secured syndicated and underwritten debt facilities, which will include a A$450-million amortising term loan with a maturity date of March 2024, a A$300-million revolving credit facility also with a maturity date of March 2024, and a A$350-million bridge facility with a maturity date of December 2021.

Bradford said that IGO was well placed to repay the bridge facility through either the sale of its interest in the Tropicana gold project, in Western Australia, or through existing cash or ongoing operational cash flows.

A review into IGO’s 30% interest in the Tropicana asset is currently under way, and IGO is expecting third party offers for the asset before the end of the year. In the event that the company’s value expectations are met or exceeded and the sale of Tropicana is completed prior to the completion of the Tianqi transaction, the bridge facility will not be drawn.

In addition to the new debt, IGO was also planning on a A$766-million equity raise to help fund the Tianqi acquisition, which will comprise a A$446-million fully underwritten institutional placement and a A$320-million 1-for-8.5 accelerated non-renounceable entitlement offer, which will have an institutional component of A$256-million.

Bradford said that IGO would issue up to 166-million new shares under the equity raising, representing some 28% of the company’s current issued capital.

The placement and entitlement offer will be conducted at a price of A$4.60 a share, representing a 9.7% discount to IGO’s last closing price on December 7, and a 7.7% discount to the company’s theoretical ex-rights price on the same date.

The balance of cash consideration of between A$85-million and A$149-million will be funded through existing cash reserves, Bradford said.

The transaction is subject to a number of conditions, including more than 50% of Tianqi shareholders voting in favour of the deal, as well as regulatory approvals in both Australia and the UK. Bradford noted that no Chinese regulatory approvals would be required for the transaction.

IGO has agreed to pay a $70-million deposit, which would be refundable if Tianqi is unable to complete the transaction, with the company also liable for a $70-million break fee if it fails to gain shareholder approval for the transaction.

Completion of the transaction is slated to take place in the June quarter of next year.

Edited by Creamer Media Reporter

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