With all the bargaining power now gone, juniors will likely bring a premium in the battery metals space and are looking attractive to the bigger miners. With several deals being listed at a premium, Merger and Acquisition (M&A) activity is already on the rise across the broader resources sector. Battery metals players are particularly attractive as demand soars and supply dries up, those in the industry say, and the majors look to cash in on the electric vehicle revolution.
Deal-maker Dominic Marinelli says ‘people are looking around for assets still and there were a few battery metals type acquisitions a little while ago’ who largely focuses on deals worth between $5 m and $150 m. A director of Terrain Capital which works on deals with partner Globalscope International M&A Advisors, Mr. Marinelli, says ‘M&A activity in the battery metals space is picking up’.
Two companies which are the best targets in the market are Jadar Lithium (ASX: JDR) and European Lithium (ASX: EUR) both have lithium projects in Europe, which in its pursuit of a leading electric vehicle industry has been aggressive. For its Wolfsberg project in Austria, European Lithium already has a mine built and been granted a mining license. The central and the local governments want to make Wolfsberg a lithium hub. Absorbed by larger players in lucrative deals, Mr. Sage European Lithium chairman has headed other junior resources companies and says the same could happen with European Lithium.
To one of the world’s largest miners — Rio Tinto (ASX: RIO), Jadar has a lithium project in Serbia right next door. Including jadarite — which contains both lithium and borates, the projects are considered prospective for lithium and other pegmatite hosted minerals. Australia as a nation hosts a majority of the major lithium projects and conversion of hard rock concentrate to the final lithium battery metals increases the profit value to up to 500 times.
In the aggressive development of Rio’s nearby lithium projects, lies the key to Jadar unlocking value in its newly acquired assets. Rio’s project is currently in the pre-feasibility stage according to the company’s current schedule and is not due to come into production until 2023. A small-scale test plant has been built to test the new technology, however, Rio has already developed a new processing technology to extract minerals from jadarite ore.
Large suitors will likely pay a premium to hurdle a deal, while there is still some work to be done before M&A will increase further. Mr. Martino, Jadar’s chairman said, ‘These small microcaps are severely under-valued, and they will become very valuable’.
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