07/03/2017 - 15:24

Uncertainty surrounds Lepidico takeover

07/03/2017 - 15:24

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Lithium Australia’s $23.8 million takeover bid for rival Lepidico appears to be heading for rejection, with the target company not confident about the operational methods of Lithium’s core asset.

Uncertainty surrounds Lepidico takeover
Lithium Australia managing director Adrian Griffin.

Lithium Australia’s $23.8 million takeover bid for rival Lepidico appears to be heading for rejection, with the target company questioning the operational methods of Lithium’s core asset.

The offer of one Lithium share for every 13.25 Lepidico shares was announced to the market early last month, at the same time the two companies were locked in a Supreme Court battle concerning intellectual property agreements.

The market is putting a higher value on Lipidico scrip than is implied by the Lithium bid.

The 13.25 shares are worth 18.55 cents at Lepidico’s current share price of 1.4 cents, while Lithium shares are trading at 16.5 cents.

Lepidico’s board has maintained caution around the proposal, labelling it highly opportunistic and below market value.

A major stated reason for Lepidico's cautious approach is its concern that Lithium’s SiLeach process technology incorporates the use of hydrofluoric acid, a highly toxic chemical that Lepidico has argued would mean the technology would not meet environmental approval for use in the process of extracting and analysing lithium ore.

Lepidico said it had repeatedly sought clarity around the SiLeach process, specifically if the process involved the use of hydrofluoric acid.

But according to the company, Lithium refused to either confirm or deny the use of the chemical.

However, Lithium managing director Adrian Griffin told Business News today that while the company had not explicitly told Lepidico that hydrofluoric acid was not used in the SiLeach process, the rival company should have enough information available to form the view that the chemical was not, in fact, used.

“The answer is clearly no, we don’t use it,” Mr Griffin said.

“When you lodge a patent application you get confidentiality for 12 months so you can actually develop the product without divulging all of the details to your competitors, and we’re in that period.”

Parkway Minerals, which is chaired by Lithium managing director Adrian Griffin, is also a shareholder in Lepidico with 97 million shares, and has agreed to sell those shares at the conversion of 13.25 Lepidico shares for every one Lithium share.

Lepidico has argued that Parkway's deal would give its shareholders a smaller return than if the stake was sold on-market, but Mr Griffin denied that, saying Parkway shareholders would emerge with a greater return.

Lithium’s SiLeach process is currently being used in pilot tests under an agreement with Western Australian lithium miner Pilbara Minerals.

The pilot tests are being undertaken at ANSTO Minerals’ research facility in NSW.

ANSTO Minerals is a division of the federal government’s Australian Nuclear Science and Technology Organisation.

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