A new A$1.7 billion takeover bid for Azure Minerals Ltd. is set to make Gina Rinehart the next big lithium player Down Under as her group, Hancock Prospecting Pty. Ltd., looks at more lithium plays.

Azure entered into a binding transaction implementation deed on Dec. 19 for the joint takeover bid by Sociedad Química y Minera de Chile SA (SQM) and Hancock, its two largest shareholders. The two teamed up on the bid after Hancock bought 18.9% of Azure in October, raising the prospect of spoiling SQM's previous bid that Azure had accepted earlier that month.

Gina Rinehart at Roy Hill's iron ore berths in Port Hedland, Western Australia. The billionaire is now looking to boost her exposure to lithium. Source: Hancock Prospecting

Hancock had previously secured a 19.9% stake in Liontown Resources Ltd. — another major West Australian preproduction lithium player — a move which was believed to have led to the collapse of Albemarle Corp.'s A$6.6 billion takeover bid for Liontown in October.

Hancock is now "reviewing a number of early-stage lithium prospects," CEO Garry Korte said in a Dec. 19 statement.

The latest Azure bid "marks the arrival in a significant way of Rinehart as a new player in the lithium industry in Western Australia who has partnered with one of the incumbents, SQM," Howard Klein, founder and partner of RK Equity, told S&P Global Commodity Insights.

BDO corporate finance partner Adam Myers mirrored Klein's statement about Rinehart. "With an interest in a range of projects north of Kalgoorlie, she's obviously establishing a regional play, and consolidating some sort of processing hub somewhere in there would make sense" given all the projects in development in the Pilbara region, Myers said.

The Ellison factor

The new joint bid is 13 cents per share higher than SQM's offer that Azure agreed to in October.

How the deal evolves could hinge on Mineral Resources Ltd., which raised its holding in Azure to 13.56% in November. Mineral Resources Managing Director Chris Ellison has expressed a determination to own up to 20% of the highly prized Andover ore body as well as a willingness to work with Rinehart and other Azure shareholders to develop the deposit, which could even include his company doing mining services for the project as it has for Rinehart's Roy Hill iron ore mine.

At the new bid price, Euroz Hartleys resources analyst Michael Scantlebury estimates Mineral Resources would generate a profit of A$2.5 million if it agrees to Hancock and SQM's takeover of Azure, "which is chicken feed" for the company.

"It wouldn't kill the takeover if [Ellison] was to vote it down and just maintain his stake either," because the deal then turns into an off-market takeover of Azure by SQM and Hancock, which is not subject to any minimum acceptances, Scantlebury told Commodity Insights.

"The new scheme requires the 75% approval of shareholders outside of SQM and Hancock's stakes, and the only major blocking stake that hasn't indicated they will accept is Mineral Resources. So that clause is obviously set up specifically for Mineral Resources. If they were very confident of him [agreeing to the takeover] they wouldn't have set it up that way," Scantlebury said.

The analyst noted that Ellison has taken blocking stakes in other explorers with significant West Australian lithium projects such as Wildcat Resources Ltd. in the past year. Such moves contributed to killing Tianqi Lithium Energy Australia Pty. Ltd.'s takeover of Essential Metals Ltd. and Idemitsu Kosan Co. Ltd.'s change of control undertaking with Delta Lithium Ltd.

"Ellison's public comments suggest he wouldn't just roll over for a A$2.5 million win for the amount of money he's put at risk, which would suggest he wants to be a partner on Andover in some form, be it downstream or securing a mining-crushing contract," Scantlebury said.

Processing opportunities

Thus, both Myers and Scantlebury say the battle for control of Andover, whose maiden mineral resource estimate is due in the first half of 2024, could end up in various parties collaborating on a central lithium refinery for some of the many deposits being developed across the Pilbara.

Hancock is in "high-level talks" with Legacy Iron Ore Ltd., the Australian subsidiary of India's giant iron ore producer NMDC Ltd., about looking into lithium processing opportunities for the Mt Bevan project, which they are jointly developing in Western Australia, Legacy CEO Rakesh Gupta told Commodity Insights.

Ellison's Mineral Resources could also benefit from a centrally located refinery in Western Australia. "Ellison has other relationships and options, but having optionality around lithium processing is something a lot of people are looking for ... to do more processing onshore than has previously been done in Western Australia," Myers said. "A regional processing solution which is multi-user might be something that plays out down the track when we have the optimal plan for the region. So there could be some further collaboration."

Mineral Resources declined to comment.

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