Lithium miner Pilbara Minerals (ASX: PLS) has won approval from the Supreme Court of Western Australia to acquire Latin Resources (ASX: LRS) which has 100% control of the Salinas Lithium Project located in Minas Gerais, a mining State of Brazil.
Pilbara’s management believes this project has the potential to emerge as one of the world's top 10 hard rock lithium-producing operations outside of Africa — while also offering the development flexibility to cater to emerging markets.
A proposed scheme of arrangement for the acquisition, includes a demerger of non-core assets which will see the transfer non-core exploration assets in Australia, Peru, and Argentina into a separate entity, ESG Minerals.
Dale Henderson, Pilbara Minerals’ managing director and CEO, expects the acquisition to deliver the company’s second 100% owned, Tier 1, hard rock lithium asset, which is expected to be low-cost and accretive for shareholders.
“It [allows] Pilbara Minerals... to sequence new supply and diversify into new growth markets for lithium, such as Europe and North America,” Henderson said.
The lithium miner believes Salinas could immediately increase Pilbara Minerals' mineral resources by around 20%, contributing up to 30% of steady-state production once it achieves competitive production costs.
Pilbara Minerals plans to progress and optimise the Definitive Feasibility Study (DFS) - initiated by Latin Resources for Salinas - towards completion.
Once the DFS is completed, Pilbara Minerals has the optionality to consider a final investment decision (FID). Pilbara Minerals said it will consider any project development and FID timing against the prevailing lithium market conditions and customer requirements, consistent with previous Pilbara Minerals production expansions.
Under the proposed scheme of arrangement Latin Resources’ shareholders will receive 0.07 new shares of Pilbara Minerals for each Latin Resources share they own after the swap and will possess around 6.4% of Pilbara Minerals’ shares.
Meanwhile, Pilbara Minerals expects the deal to provide Latin Resources shareholders with improved market positioning, increased liquidity, better access to capital markets, and inclusion in relevant Australian Securities Exchange (ASX) and global indices.
Pilbara Minerals had retained Barrenjoey as financial advisor and Corrs Chambers Westgarth as legal advisor in relation to the scheme. Latin Resources appointed Macquarie Capital (Australia) as its financial advisor and King & Wood Mallesons as its legal advisor.
Consensus on Pilbara Minerals is moderate buy.