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posted on Dec 22, 2022 10:14AM

Lithium Americas poised to be Argentina's battery-metal ‘monster’ with arena deal

Lithium Americas Corp is seeking to scoop up more Argentina assets as it looks to acquire a dominant position in the fastest-growing region for the battery metal.

Lithium Americas Corp is seeking to scoop up more Argentina assets by acquiring Arena Minerals Inc, giving the Canadian company a dominant position in the fastest-growing region for the battery metal.

Lithium Americas offered to buy the shares it doesn’t already own in Arena Minerals in an all-stock deal that values the Toronto-based minerals explorer at C$311 million (US$227 million), according to a Tuesday statement. The deal comes within a year of Lithium Americas outbidding rivals to acquire Millennial Lithium Corp, another Canadian minerals explorer that had assets in lithium-rich Argentina.

A global shift from fossil fuels to cleaner energy sources is fueling soaring demand in electric vehicles, creating a shortage of battery materials and a gold rush to secure global supplies including lithium. Argentina, in particular, has become a popular place for metals explorers on the hunt for lithium resources.

The takeover “allows Lithium Americas to continue consolidating the region and becoming a lithium monster in Argentina later this decade,” said Chris Berry, president of consultancy House Mountain Partners, calling it “a really accretive deal for them given the growth prospects for lithium in Argentina.”

Lithium Americas’ South America position would give the company the capacity to produce 100,000 tons of lithium carbonate a year, Cowen & Co analyst David Deckelbaum said in a note.

The deal, which requires shareholder approval, is valued at 67 Canadian cents a share, based on the offer of 0.0226 of a Lithium Americas share for each Arena share, according to the statement. That translates into a 28 percent premium to Monday’s closing price.

Shares of Lithium Americas fell 3.9 percent to C$28.35 at 12:52pm in Toronto. Arena Minerals rose 15 percent to 60 Canadian cents a share.

The Vancouver-based firm already had about a 20 percent stake in Arena Minerals, while a subsidiary of China’s Ganfeng Lithium Group Co held about 16 percent, according to data compiled by Bloomberg. Ganfeng has agreed to sell its stake prior to the close of the deal.