SQM makes $1.6bn move for Azure

Chilean lithium giant SQM has struck a $1.63 billion deal to acquire Mark Creasy-backed Pilbara battery metals explorer Azure Minerals, but a share raid this morning has clouded the transaction.

Azure’s has endorsed a binding on-market transaction by its cornerstone investor, which at $3.52 per share represents a 44.3 per cent premium to the company’s last closing price on October 20, in the absence of a superior offer.

It represents a culmination of a whirlwind six months for Azure, which became a market darling off the back of lithium intercepts at its 60 per cent owned flagship Andover project in the West Pilbara.

Creasy Group owns the remaining 40 per cent of Andover.

In January, SQM took a strategic stake in Azure though a $20 million investment at 25.6 cents per share, which gave it a 19.99 per cent stake in the company.

Azure’s share price has climbed significantly off the back of strong lithium intercepts at Andover, where the company had in recent years defined a number of nickel-copper-cobalt deposits before pivoting its exploration focus.

In August, Azure set a conceptual exploration target for Andover of between 100 million and 240 million tonnes grading 1-1.5 per cent lithium oxide.

Azure managing director Tony Rovira said the company had carefully considered the offer put before it and decided it was the best path forward for development.

“Whilst we firmly believe that Andover has the potential to be a major lithium project, there is significant time, cost and risk association with developing a project of this scale, particularly in the context of an uncertain broader economic outlook,” he said.

“As such, the board believes that the transaction provides Azure shareholders with a compelling opportunity to de-risk their investment and realise certain value at an attractive premium to historical trading levels.”

SQM’s move for Azure is subject to Foreign Investment Review Board and shareholder approval, and no other shareholder acquiring a stake of more than 19 per cent in the company.

A simultaneous off-market takeover offer at $3.50 per share has also been put forward and would kick in should the on-market deal not be successful. It's understood this clause was introduced as a move to safeguard the transaction in the event of a second company acquiring a major stake of Azure, as happened with Albemarle's recent play for Liontown Resources, which was thwarted by Gina Rinehart's Hancock Prospecting.

There was speculation today that a third party may be buying up a stake in the company, following a raid on shares through a stockbroker this morning at a price close to SQM's bid price. 

The deal represents SQM’s second move for Azure, after a $900 million offer was rejected in August.

SQM is already a major player in the state’s lithium sector through its Covalent Lithium joint venture partnership with Wesfarmers at the Mount Holland lithium project.

Earlier this week, the Chilean company bought an initial 30 per cent interest in recently listed Pirra Lithium, which is also exploring for lithium in the Pilbara.

SQM’s largest shareholder is Tianqi Lithium Corporation.

Barrenjoey is acting as financial adviser to the Azure transaction, and Corrs Chambers Westgarth as legal adviser. 

AZS shares were up 43 per cent this morning, trading at $3.49 at 8.50am WST.