Australian Vanadium and Technology Metals Australia chiefs have described their proposed merger as the most logical consolidation imaginable despite a block of shareholder against the deal.
Australian Vanadium and Technology Metals Australia chiefs have described their proposed merger as the most logical consolidation imaginable despite a block of shareholder against the deal.
Takeover target TMT's chief executive Ian Prentice and Australian Vanadium boss Graham Arvidson have both robustly reaffirmed their support for the $217 million merger at a media event this afternoon.
It comes despite a block of more than 16 per cent of TMT's shareholders indicating their intention to vote against the scheme of arrangement at the meeting scheduled for January 16.
TMT’s board has unanimously recommended approval for the deal, which would see the consolidation of their neighboring assets split across a vanadium orebody in the Mid West.
Perth-based TMT’s Murchison project boasts a 153.7-million-tonne resource and 44.5mt mineral reserve at 0.89 per cent vanadium oxide.
AVL’s adjacent namesake project has a 239mt resource and 30.9mt ore reserve going at 1.09 per cent vanadium oxide.
Mr Arvidson said combining the companies, which would have a market cap of about $186 million, would allow them to tap into the limited pools of funding available.
“Building these critical metals projects is not easy, so I think a really important factor in us coming together is that takes a lot of capital to develop a project like this and there are limited pools of capital to access whether that's government related funding or equity market funding,” he said.
“There's just limited pools of capital and I think as shareholders of either company, it's one of the most rational things you can do is to scale.
“So, if there's any single thing that the company can do to create a brighter future together is to make sure that we have that capital available when it comes time.”
A block of about 16 per cent of TMT's shareholders have outlined their intention to vote against the merger which needs 75 per cent shareholder approval to pass.
Mr Prentice said he believed those shareholders against the merger saw it as a logical deal, but stopped short of confirming whether their concerns related to the value of the $217 million merger.
Further, Mr Arvidson said the proposed deal had already been “fully negotiated” and that TMT had negotiated a “better outcome for their shareholders.”
Meanwhile, TMT’s major shareholder Resource Capital Funds, which holds an 18 per cent stake, has indicated its intention to vote in favor of the scheme.
Mr Arvidson said for the past 50 years vanadium had been a story of steel, having historically been used as a steel alloying agent which he said still had a bright future.
But he said what really excited them was the battery thematic evolving.
“This battery thematic is not a farfetched thesis, it's actually based on many decades old technology called vanadium flow batteries that have been fully commercial for decades so the technical risk side of it is low,” he said.
“It has historically only been about 1 per cent of the market going into those batteries over the last 20 to 30 years but just recently, if you plot it from 2019, it's gone from 1 per cent of the market, to what is now 10 per cent of the market.
“So, in about three years, you've had a serious structural change in the market of how much vanadium is going into these batteries.”
Both companies are progressing separate feasibility studies and environmental approvals for their projects, and dismissed concerns around red tape post-proposed merger.
