IGO lithium joint venture announces $136m bid for Essential Metals

Tianqi Lithium Energy Australia (TLEA) is set to acquire Perth-based lithium exploration company Essential Metals (ASX: ESS) through a $136 million scheme of arrangement.

TLEA is a joint venture between IGO (ASX: IGO, 49% equity) and China’s Tianqi Lithium Corporation (51%).

The scheme has been priced at $0.50 per share, payable in cash, and represents a 45.7% premium to Essential’s one-month volume weighted average share price of $0.343.

The proposed transaction will help build TLEA’s asset portfolio by offering entry into a highly prospective lithium province.

Essential’s directors have recommended that shareholders vote in favour of the proposed acquisition.

Each director has confirmed an intention to vote their own shares in favour.

Pioneer Dome lithium project

Essential owns the Pioneer Dome lithium project in Western Australia, covering an area of 450 square kilometres between the towns of Esperance and Kalgoorlie.

The pre-development project is in close proximity to lithium projects at Mount Marion (owned by Mineral Resources, ASX: MIN) and Bald Hill (currently on care and maintenance).

Pioneer Dome is one of 14 JORC-compliant spodumene lithium deposits in Australia and has a defined resource of 11.2 million tonnes at 1.16% lithium oxide.

Essential also holds interests in several early-stage exploration lithium, nickel and gold projects.

Uncertain economic outlook

Essential managing director Tim Spencer said the TLEA proposal would provide certainty for shareholders in the context of an uncertain economic outlook.

“This scheme provides our shareholders with an opportunity to realise an attractive cash amount of $0.50 per share, reflecting a compelling premium of nearly 46% over the current market value,” he said.

“We believe this transaction would be a great outcome for all stakeholders including employees, suppliers, the Ngadju people and the state of Western Australia… benefit from Pioneer Dome being developed by a large, well-financed and experienced lithium sector participant such as TLEA.”

Diversifying the portfolio

IGO acting chief executive officer Matt Dusci said the Essential acquisition will help diversify TLEA’s lithium portfolio in Western Australia.

“We are committed to progressing and growing our lithium joint venture business with Tianqi Lithium Corporation this transaction provides an opportunity to accelerate lithium exploration to bring new resources to production,” he said.

“We look forward to supporting TLEA with future work programs over the Essential assets, as it seeks to address the market deficit of raw materials critical for clean energy transition.”

Mr Dusci said TLEA aims to secure additional resources through future exploration, with a focus on building a globally significant lithium business.