Gina Rinehart and Chile’s SQM to buy lithium miner Azure

Gina Rinehart and Chile’s SQM have agreed to jointly acquire Western Australian lithium prospect Azure Minerals for A$1.7bn ($1.1bn) after the Australian billionaire disrupted an earlier bid for the business in October. 

Rinehart’s Hancock Prospecting and SQM control almost 38 per cent of shares in Azure, which is mining for lithium in the Pilbara region. Shareholders controlling a further 23 per cent of the stock said they would support the new offer. 

The deal marks how Australia’s lithium industry is reshaping, with local billionaires looking to gain a foothold in a market dominated by Chinese companies. The wave of dealmaking in the global lithium sector this year has come after a 80 per cent collapse in prices for the electric car battery ingredient helped reduce the valuations of producers.

Australia, which supplies about half of the world’s raw product, has been a particular focus as it is seen as one of the most reliable sources of supply to meet future demand and is a US free trade partner.

SQM, the world’s second largest lithium producer, tried to buy Azure two months ago but Rinehart built a strategic stake that threatened to derail the deal. A similar move by the billionaire led to the collapse of industry leader Albemarle’s A$6.6bn takeover of Liontown Resources.

The move to partner with Rinehart combines the Australian company’s mining experience in iron ore with SQM’s expertise in processing lithium to battery-grade material.

Shares in SQM have fallen by more than a quarter this year because of the pressure on lithium prices and the threat of the Chilean state taking greater control of the country’s lithium industry.

SQM has invested in Azure Minerals, and is part of a joint venture with Wesfarmers in the Mount Holland mine and Kwinana processing plant in Western Australia. It is also negotiating with Chilean state copper mining group Codelco over its flagship lithium concession that is due to expire in 2030.

The Azure deal is complex, with the company controlled by a handful of large investors including Chris Ellison, the billionaire behind Mineral Resources, who has also been investing in early stage lithium projects in the region.

Shareholders in Azure will be required to vote on whether to allow SQM and Hancock to jointly bid for the company before voting on whether to accept the offer, which was pitched at A$3.70 a share in March.

“With Hancock reviewing a number of early stage lithium prospects, this offer continues Mrs Rinehart’s substantial support for the West Australian mining industry,” said Garry Korte, chief executive of Hancock.

If successful, SQM and Hancock will each control 50 per cent of Azure. If the offer fails then the bidders will revert to an on-market takeover offer of A$3.65 a share that would allow other shareholders including Ellison to retain his minority 13.5 per cent stake.

Rinehart has been on an investment push this year. She has bought a stake in a farmer’s market in Bunbury, a Western Australia city, Rossi Boots and Australian outback coat brand Driza-Bone in the past month.