Galaxy Resources and General Mining have agreed to merge under a $700-plus million agreement announced on Monday.
The merger will create a leading diversified global lithium company that will aim to capitalise on the surging demand for the commodity on the market.
The agreement values General Mining at approximately $216 million and will see Galaxy acquire all of the issued shares of General Mining that it does not already own in a share based transaction by way of an off-market takeover offer.
“Under the offer, General Mining shareholders will receive 1.65 new Galaxy shares or every 1 General Mining share held, which represents a 9.4% premium to the 10-day volume weighted average price (VWAP) and 13.5% premium to the 20-day VWAP,” reads the joint statement to the ASX.
The two companies are joint venture partners in the Mt Cattlin lithium mine in Western Australia’s southwest. The joint venture was created in 2015, enabling the re-commissioning of production at the mine earlier this year.
Since then, the JV partners inked an offtake agreement for 60,000 tonnes of lithium concentrate with two China-based buyers, and additional sales and distribution agreement with Mitsubishi Corporation for spodumene concentrate produced from the mine.
Commenting on the proposed merger, Galaxy Chairman, Mr Martin Rowley said:
“The arrangement struck between Galaxy and General Mining has enabled the re-commissioning of the Mt Cattlin mine, drawing on General Mining’s financial and technical resources, with Mt Cattlin now poised to deliver first production of spodumene to contracted buyers in the third quarter of calendar 2016,” Mr Rowley said.
General Mining Chairman, Mr Michael Fotios said the two companies were an “excellent and natural fit”, given their existing joint venture-owned assets and complementary project development.
“Both companies have successful track records of creating substantial value for shareholders and, together, we will retain this focus. Our ability to capture future growth opportunities in the rapidly evolving lithium market will be significantly enhanced by this merger,” Mr Fotios concluded.
