Pilbara makes a move on Altura

29th October 2020 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – Lithium miner Pilbara Minerals has moved to potentially acquire the Altura lithium project, in Western Australia, for $175-million, after ASX-listed Altura Mining went into voluntary administration earlier this week.

Altura earlier this week appointed receivers and managers to conduct an urgent assessment of the company’s financial position, with the intention of transitioning the lithium operations into care and maintenance in the coming weeks in order to preserve near-term cashflow.

Ahead of going into administration, Altura noted that operations at its lithium project had remained steady, with production in the September quarter expected to reach between 43 000 t and 45 000 t, in line with previous quarters. Shipping tonnage for the September quarter exceeded production, with a total of 51 217 t sold.

The company’s shareholders at the end of last week also voted in favour of an offtake agreement executed with major shareholder Hunan Yongshan Lithium Company, with the five-year binding offtake agreement expected to start in January next year with a minimum of 60 000 t/y from January 2022. The binding offtake agreement includes options to agree to increase the supply to 120 000 t/y.

Pilbara Minerals this week announced that it has entered into an implementation deed with the senior secured loan noteholders of Altura, providing a path to potentially acquire the Altura lithium project through the purchase of the shares in Altura Lithium Operations (ALO) for $175-million, subject to completion of the receivership process.

Under the implementation deed, loan noteholders have agreed to vote in favour of the Pilbara Minerals sponsored deed of company arrangement (DOCA), should the acquisition proceed.

Pilbara has also procured the right to match any competing proposal offered for the Altura project, and has secured payment of a break fee in the event that the receivers accept a competing proposal, or the loan noteholders failed to vote in favour of the DOCA.

The ASX-listed company has agreed to pay an upfront cash payment of $155-million and a deferred consideration of up to $20-million for the shares in ALO on the successful completion of the transaction.

The company told shareholders that the upfront cash consideration would be funded through a future equity capital raising, which is being supported by binding equity funding commitments for a total of A$240-million.

Pilbara MD Ken Brinsden said that the potential acquisition presented a logical consolidation of two neighbouring operations to unite the greater Pilgangoora orebody, and would unlock tangible synergies in both the short and the long term.

“If successful, the acquisition will cement Pilbara Minerals’ position as the largest pure-play ASX-listed lithium company by enterprise value and will provide strong leverage to the expected recovery in lithium prices, driven by the increasing demand for electric vehicle and energy storage applications evident across the world.

“We believe this will help safeguard jobs in the Western Australian lithium sector and ultimately create some exciting new growth opportunities that will deliver a range of benefits for the local economy.”

Brinsden said that the receivership process would provide Pilbara Minerals with the time to further assess the optimal management for the combined lithium mining operation, including the full extent of potential operational synergies and savings from the acquisition.

Despite Pilbara Minerals' eagerness to acquire the Altura lithium project, the company’s administrators will continue to conduct a formal process to market ALO and its asset for sale and recapitalization opportunities, with the process expected to take five weeks.

The administrators and receivers have asked any other interested parties to express their interest in participating in the sales process.