Tawana and Bald Hill JV partner Alliance to merge and create A$446m mid-tier lithium play

Tawana Resources ASX TAW Alliance Mineral Assets Bald Hill lithium merger
Lithium concentrate stockpile from ore mined from Tawana's Bald Hill project.

Tawana Resources (ASX: TAW) has announced plans to merge with its Bald Hill joint venture partner Singapore-listed Alliance Mineral Assets (SGX: 40F), with the combined entity possessing an anticipated market cap of A$446 million.

Both companies have recommended the merger in the absence of superior proposals.

According to Tawana, the merger will be equal, with Tawana shareholders holding 50% of the combined entity and Alliance shareholders owning the other 50%. A mixture of directors from both boards will sit on the combined company’s board.

As part of the merger, Tawana has announced an underwritten A$20 million placement to fund ongoing commissioning of the Bald Hill mine as well as future exploration, feasibility and expansion project studies.

The placement will be at A$0.41 per share which represents a 10.5% discount to Tawana’s five-day volume weighted average price.

Tawana is also reserving the right to issue a further A$5 million placement. However, this is not underwritten.

Alliance will also be undertaking a A$25 million underwritten placement at the same time, with Alliance investors able to scoop up the company’s shares at S$0.33 each, representing a 9.7% discount to Alliance’s five-day volume weighted average share price.

According to Tawana, the higher A$446 million market cap will place the new company on global and domestic investor radars.

Merger rationale

Via the combined entity, Alliance and Tawana plan on becoming a mid-tier lithium producer from Bald Hill, which has current indicated and inferred resources of 18.9 million tonnes grading 1.18% lithium and 149 parts per million tantalum for 223,000t of contained lithium and 5.1 million pounds of tantalum.

The merged entity will also have greater liquidity and financial capacity to progress exploration and growth initiatives.

An additional advantage is a simplified ownership structure at Bald Hill to enhance operational efficiencies.

Bald Hill production on-track

Bald Hill encompasses 774 square kilometres and the current resource only accounts for 25% of the known pegmatites in the southern part of the project.

Tawana has purported numerous times that Bald Hill was “significantly underexplored”.

The project is de-risked with offtake partner and major Alliance shareholder Burwill Holdings agreeing to purchase 6% spodumene concentrate from Bald Hill for US$880 per tonne during 2018 and 2019.

Late last week, maiden spodumene concentrate production had been successfully completed with performance tests exceeding nameplate capacity and average lithium grades.

The performance tests during commissioning resulted in a processing capacity of 173 tonnes per hour – greater than the nameplate capacity of 162tph.

Primary concentrate grades averaged 7.03% lithium, 0.34% iron, plus 1.12% sodium and potassium.

The merger remains conditional on regulatory and shareholder approvals, but upon achieving this, the duo anticipates the transaction will wrap up in the final quarter of this year.

Tawana’s last share price was A$0.455 before it entered a trading halt. It is expected the trading halt will be lifted on Monday 9 April 2018.

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