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SQM invests $1.6 billion in Australian lithium

Chile’s SQM is set to invest an additional $1.6 billion to expand its presence in the Australian lithium production and export sector through the acquisition of Azure Minerals (ASX:AZS). This move will bring SQM’s total planned and spent investments in the sector to well over $3 billion.

Azure Minerals’ board has accepted SQM’s offer of $3.50 per share, which represents a more than 50% increase from SQM’s initial offer of $2.31 in August, valuing Azure at just over $900 million at that time.

Back in January, when SQM initially invested $4.2 million in Azure Minerals, Azure was trading at just 12 cents a share. SQM’s investment made it the largest shareholder in the lithium junior with a 19.9% stake, and it indicated its intention to invest an additional $15.8 million in Azure.

The decision to make a full bid was driven by the exceptional results from Azure’s Andover lithium prospect in the Pilbara, which has garnered support from major shareholder Delph, a German investor group.

Mark Creasy’s company, Yandal, which owns over 13% of Azure’s shares and 40% of the Andover project, stands to benefit significantly from this deal, potentially worth $1.5 billion for the Andover stake and over $200 million for the shares.

Azure’s CEO, Tony Rovira, emphasised the potential of the Andover project but also acknowledged the challenges associated with its development, particularly in the current uncertain economic environment.

This acquisition solidifies SQM’s position in the Australian hard rock lithium sector, complementing its dominant role in Chile’s brine-based sector, along with Albemarle.

SQM faces increasing pressure from the Chilean government due to its dominance in brine-based lithium production. The government aims to involve state-owned copper miner Codelco in overseeing industry expansion, potentially by acquiring some of SQM’s and Albemarle’s assets.

This takeover marks the third billion-dollar-plus deal in the sector this year, following Albemarle’s abandoned $6.6 billion offer for Liontown Resources and Gina Rinehart’s $1.2 billion raid on Liontown.

Pending successful completion, SQM will join Albemarle as a leading foreign player in the Australian lithium sector and one of the dominant global players.

While SQM will rank slightly behind Albemarle due to Albemarle’s position in the Greenbushes mine and lithium hydroxide refinery in Western Australia, it continues to expand its presence.

This week, SQM also confirmed a deal to acquire a 30% stake in Calidus Resources’ Pilbara lithium project, with plans to increase its stake to 40%.

SQM’s most substantial Australian investment to date is the 50-50 joint venture with Wesfarmers in Covalent Lithium, which includes the Mount Holland mine and hydroxide refinery valued at over $2 billion and located in Western Australia.

Additionally, SQM has an earn-in agreement with Tambourah Metals for the Julimar North Project in Western Australia, near Chalice Mining’s significant Gonneville project.

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