Lithium Americas to buy Arena Minerals in US$227M all-share deal

Lithium Americas (TSX: LAC; NYSE: LAC) is buying all the shares it does not already own of fellow Canadian Arena Minerals (TSXV: AN) in a deal that gives the Vancouver-based lithium miner further access to the Pastos Grandes basin in Argentina.

The transaction, which values the target company at US$227 million, will see Arena’s shareholders receive 0.0226 of a Lithium Americas common share for each Arena share held. This would result in Arena investors owning about 5.7% of Lithium Americas.

The move seeks to combine two neighbouring projects operated by the companies in the Pastos Grandes basin, located in the Argentine’s side of South America’s lithium triangle, close to Lithium America’s Caucharí-Olaroz. This lithium brine project is expected to begin lithium carbonate production in the first half of 2023.

“The significant synergies between our two projects and a better understanding of the basin will enable us to advance development planning and maximize our growth pipeline in Argentina,” chief executive officer, Jonathan Evans, said in the statement.

The deal, expected to close in the third quarter of 2023, comes as Lithium Americas goes to a business transformation that will see it separate its North American and Argentine businesses into two independent public companies.

The new Lithium Americas company, to be headed by Evans, will own the Thacker Pass lithium project in Nevada and investments in Green Technology Metals (ASX: GT1) and Ascend Elements.

The other new company, Lithium International, will focus on the Argentine assets, the company said in November. These projects include Caucharí-Olaroz and Pastos Grandes.

China-based Ganfeng Lithium, GFL International and their affiliates collectively own about 16% of Arena’s outstanding shares as well as warrants that if exercised would represent a further 6% stake. 

Lithium Americas said Ganfeng has entered an agreement to dispose of all of its securities of Arena prior to the merger closing.

Prices of lithium have continued to climb this year, after an explosive rally in 2021, even as more supply of the battery metal has hit the market. 

Benchmark Mineral Intelligence data shows spodumene prices up 257% this year, averaging some US$5,900 a tonne for 6% concentrate Australian free on board price (FOB) in November.

Australia, the world’s largest lithium exporter, is predicting a sharp fall of the metal’s prices in 2024.