14/12/2020 - 13:00

Pilbara moves on Altura deal

14/12/2020 - 13:00

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Pilbara Minerals has launched a $240 million equity raising to fund its acquisition of Altura Mining’s Pilgangoora lithium project.

Altura’s Pilgangoora Mill. Photo: Gabriel Oliveira

Pilbara Minerals has launched a $240 million equity raising to fund its acquisition of Altura Mining’s Pilgangoora lithium project.

Pilbara Minerals moved closer to gaining control of Altura’s key asset earlier this month, after it struck a US$175 million agreement with the lithium miner’s receivers and managers.

That share sale agreement with KordaMentha’s Richard Tucker and John Bumbak provided for the acquisition of Altura Lithium Operations Pty Ltd (ALO), which owns Altura’s Pilgangoora lithium project, located approximately 123 kilometres from Port Hedland.

At that time, Pilbara Minerals  also proposed a Deed of Company Arrangement (DOCA) with Cor Cordis partners Cliff Rocke and Jeremy Nipps, in their capacity as administrators of ALO.

Under the DOCA, Pilbara proposed that it would contribute A$6 million (up from $A4 million) to a fund to support the entitlements owing to Altura employees who had been made redundant since the mining project was placed on care and maintenance last month.

That DOCA was approved by ALO creditors and executed on December 11, satisfying a key pre-condition to the proposed acquisition off the project.

Completion under the share sale agreement is also conditional on the completion of the $240 million equity raising in support of the transaction.

The acquisition will be largely funded via the $240 million equity raising, which comprises a $119 million cornerstone placement to AustralianSuper Pty Ltd and Resource Capital Fund VII L.P. with that placement now complete.

The raising also includes a $121 million fully-underwritten 1-for-7.6 non-renounceable entitlement offer – which launches today – issuing 337 million new shares.

The group has proposed a price of $0.36 per share.

Pilbara Minerals managing director Ken Brinsden said the organisation was pleased to confirm the successful completion of the placement and to announce the formal launch of the entitlement offer to all eligible shareholders, which represented the final step in acquiring the Altura Project.

“The acquisition of the Altura Project on an unencumbered basis provides us with maximum flexibility to operate an enlarged Pilgangoora Operation once both projects have been integrated and consolidated,” Mr Brinsden said.

“The Receiver placed the Altura Project into care and maintenance on October 26 2020 and, since then, our technical team has been undertaking an evaluation of the operations, which, when combined with an assessment of the prevailing market conditions, will ultimately help us decide when to recommence operations at the Altura Project under a single unified operation.”

Pilbara Minerals owns an adjoining lithium project with the same name (Pilgangoora) and anticipates big efficiency gains from the consolidation of operations by leveraging tangible synergies such as the integration of mining operations, economics of scale, removal of duplicated services and unlocking sterilised Ore Reserves at the tenement boundary.

The miner anticipates quantifiable operational synergies of $18 to $27 million per annum, with several additional synergies subject to further work.

Pilbara Minerals is uniquely placed to realise the full value of benefits that should arise from acquiring the neighbouring Altura Project,” Mr Brinsden said.

“This, when combined with the additional production capacity and uncommitted offtake positions, means we are strongly placed to capitalise on improving lithium market conditions and the expected long-term industry growth trend.”

Pilbara Minerals entered a trading halt on Friday.

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