Hancock, SQM progress Azure takeover

Hancock Prospecting has urged Azure Minerals shareholders to back the $1.7 billion takeover offer to “avoid future challenges and uncertainties” with developing the Andover lithium project amid market volatility. 

In a statement, Gina Rinehart-led Hancock said Azure shareholders should support the proposed transaction "to avoid the uncertainties associated with the Andover project as well as lithium market volatility."

“There is an opportunity for Azure shareholders to avoid the future challenges and uncertainties of project development by supporting the transaction," Hancock chief executive Garry Korte said.

“The joint bidders’ offer price exceeds both the independent expert’s valuation range and the sensitivity range calculation of the Azure board."

It comes as the parties distributed scheme and transaction booklets today, with Azure reiterating that its board unanimously recommends its shareholders vote in favour of the scheme of arrangement priced at  $3.70 cash per Azure share, subject to no superior offers. 

If the scheme is unsuccessful, then Hancock and SQM plan to launch an off-market takeover offer priced at $3.65 cash per Azure share. 

The 50:50 joint bidders lobbed their takeover proposal in December, replacing SQM’s earlier deal to acquire Azure at $3.52 per share after Hancock upped its stake in the target.  

Azure owns 60 per cent of the Andover lithium project in the Pilbara, which is also prospective for nickel, copper and cobalt. Mining entrepreneur Mark Creasy directly holds the remaining 40 per cent.

Hancock said the Andover project had the potential to be a high-quality and large-scale lithium project, including downstream refining for the production of high value battery materials. 

The bidder said Azure's board noted that lithium asset valuations were highly sensitive to the lithium price used for the purposes of calculating the ‘normalising factor’ used to compare relevant transactions.

“To provide Azure shareholders with an indication of the sensitivity, the Azure board prepared its own calculation of the expected value range on the same basis as used by the independent expert but calculating the normalising factor using a long-term price rather than a short-term spot price," Hancock said.

“Azure’s calculations indicate that the value of the Andover project would be expected to be approximately A$956 to $1,434 million, resulting in a valuation range for Azure of approximately A$2.40 to $3.50 per share.”

The miner said it considered the joint bidders to be uniquely placed to manage the "substantial challenges associated with any major lithium project development."

Despite lithium market volatility, Hancock touted its long term approach to resource development projects, and said it looked through short-term price fluctuations in commodity markets.

“Hancock continues to consider that the outlook for potential high quality lithium projects like Andover remains favourable over the long-term”, it said.

The miner reiterated that Azure’s major shareholders Creasy Group (12.8 per cent) and Delphi Group (10 per cent) had inked their intention to sell all of their shares to the joint bidders. 

Mineral Resources reportedly offloaded its 14.5 per cent stake in Azure in February. 

Azure will hold a scheme meeting on April 8.