Wesfarmers eyes lithium with A$776m cash bid for Kidman

2nd May 2019 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

Wesfarmers eyes lithium with A$776m cash bid for Kidman

Photo by: Reuters

PERTH (miningweekly.com) – ASX-listed Wesfarmers is trying its hand at lithium, having launched a non-binding and conditional A$776-million cash offer for fellow-listed Kidman Resources.

Wesfarmers, which recently launched a A$1.5-billion cash bid for mineral sands miner Lynas, is offering Kidman shareholders A$1.90 in cash for each of their shares.

The offer price represented a 47.3% premium to Kidman’s last closing price on May 1, and a 44.4% premium to the company’s 60-day volume weighted average share price.

Kidman’s stock moved 44% higher on the announcement to A$1.86 a share.  The company board stated that it, and its major shareholders, intended to support the takeover offer if a binding transaction was offered.  

Kidman’s main asset is its 50% interest in the Mt Holland lithium project, in Western Australia, which is jointly owned by the Sociedad Quimica y Minera de Chile SA (SQM).

The integrated Mt Holland project is expected to produce spodumene concentrate from the mine and concentrator project, which would then be transported to the Kwinana lithium refinery and processed to produce some 45 254 t/y of battery grade lithium hydroxide.

Over an estimated project life of 47 years, the integrated Mt Holland project would deliver earnings before interest, taxes, depreciation and amortisation of $22-billion, and average revenues of $713-million a year.

Wesfarmers MD Rob Scott said that the acquisition of Kidman would provide an attractive investment in a project that would benefit from the global uptake of electric vehicles, while drawing on the Wesfarmers Chemicals, Energy and Fertiliser business’ ability to design, construct, commission and operate complex chemical plants.

“The proposed acquisition is consistent with our objective of deploying capital in areas where we can deliver attractive returns to our shareholders by leveraging our existing strengths and capabilities. It will underpin the development of the Mt Holland lithium project and deliver Kidman’s shareholders an attractive premium and certain cash return.”

Scott said that the acquisition of Kidman provided an opportunity to invest in, and develop a large-scale, long-life and high-grade lithium hydroxide project in Western Australia, and created a unique partnership with SQM.

The Wesfarmers offer remains subject to a number of conditions, including Kidman’s completion of a definitive feasibility study on the Mt Holland project, and Wesfarmers and SQM entering into an agreement to document certain commercial matters relating to a joint venture and marketing arrangement that would apply if the transaction proceeded.

Final board and shareholder approvals would also be required.

The acquisition would be funded through Wesfarmers’ existing balance sheet capacity and debt facilities.