The Business Times

Orocobre buys Galaxy to form world's 5th-largest lithium company

Published Tue, Apr 20, 2021 · 05:50 AM

Bengaluru

AUSTRALIA'S Orocobre Ltd and Galaxy Resources announced a A$4 billion (S$4.14 billion) tie-up on Monday to create the world's fifth largest lithium miner, as demand soars for the key raw material in electric vehicle batteries.

Orocobre will acquire peer Galaxy under a scheme of arrangement for A$1.78 billion in shares, also creating Australia's largest lithium pure play.

"It's overwhelmingly positive. On a high level, you have got significant synergies with both businesses having an Argentina base," said analyst Reg Spencer of broker Canaccord Genuity.

Shares of both companies hit more than three year highs in early trade, with Orocobre gaining 5.7 per cent to end at A$6.55 and Galaxy rising 6.1 per cent to end at A$3.83.

Both companies have significant expansion plans, putting the merged company on track to produce more than 130,000 tonnes of lithium carbonate equivalent (LCE), with operational synergies and global diversity to make it a major global player, Mr Spencer added.

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Orocobre and Galaxy, which operate the Olaroz and Sal de Vida lithium projects in Argentina respectively, are looking to consolidate their assets in the country.

"The transaction will allow the group to materially accelerate the development of our combined growth projects," Galaxy CEO Simon Hay said.

Orocobre chief executive Martin Perez de Solay will take the top job at the new entity while Mr Hay will be president of international business, reporting to Mr de Solay. Corporate headquarters will be on Australia's east coast.

The merged company will have a strong balance sheet with US$487 million in cash, better access to finance and streamlined product marketing. By market capitalisation, it will come fifth after Ganfeng Lithium Co, Albemarle Corp, SQM, and Tianqi Lithium Corp.

Australian-listed lithium miners have been outlining expansion plans as global stimulus measures to combat the effects of the coronavirus pandemic appear to be bearing fruit.

China, the world's biggest producer of battery chemicals, reported a sharp jump in economic growth in the first quarter.

Under the deal, Galaxy shareholders will receive 0.569 Orocobre shares for each Galaxy share. Orocobre shareholders would ultimately own 54.2 per cent of the combined entity, with Galaxy shareholder holding the remaining 45.8 per cent.

The deal has the unanimous support of the Galaxy board, subject to an independent report and no superior proposal emerging. It is due to complete in August. REUTERS

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