Australian miners in $4 billion lithium play to create world’s 5th biggest supplier

Australian lithium producers Orocobre and Galaxy are to merge to create what they claim will be the fifth largest pure-play lithium chemicals company in the world, with a market worth of around $4 billion, and lithium operations in Australia, Chile, Argentina, Canada and Japan.

Lithium is one of the central components of lithium-ion batteries. With electrification of transport ramping up and with grid-scale batteries playing an increasingly central role in renewably-powered electricity networks, demand for lithium is expected to soar this decade. Australia is by far the biggest producer of lithium in the world, followed by Chile.

There are two widespread methods of mining lithium: extracting lithium ore spodumene concentrate from hard rock, and extracting lithium carbonate from brine, generally found in inland salt lakes particularly in South America.

The merged company will use both methods, with hard rock mines in Mt Caittlin, Western Australia, and James Bay in north-east Canada, and brine operations in Olaroz and Naraha in Chile, and Sal de Vida in Argentina.

The two companies are both ASX-listed and of a similar size (Orocobre is slightly larger, with a market cap of around $2.2 billion to Galaxy’s $1.8 billion), and the deal is being pitched as a “merger of equals”. But in reality Orocobre looks to have the upper hand in the deal. Galaxy itself will be dissolved and shareholders will be issued shares in Orocobre equivalent to their current shareholdings. Orocobre chief executive Martín Pérez de Solay will be CEO of the new business.

Though listed on the Australian share market, the merged company will have its head office in Buenos Aires, Argentina, with a corporate headquarters on the Australian east coast and an office in Perth. It may change its name from Orocobre, though that is yet to be confirmed.

Rowley said the merger had the “potential to be a significant value-creating opportunity for Galaxy and Orocobre shareholders”.

“The merged entity’s growth opportunities in both brine and hard rock position it uniquely to take advantage of expected rising EV demand for lithium.”

Hubbard said: “The logic of this merger is compelling. Both Orocobre and Galaxy shareholders will benefit from the diversification, growth and scale of a top five global lithium chemicals company.”

The share prices of both companies increased by more the 3 per cent in early trading on Monday – a favourable though hardly ecstatic response from the market. The merger will require the support of shareholders to go through.

By the two companies’ own calculations, the merger will make it the fifth biggest pure-play lithium chemicals company in the world, behind only only China’s Ganfeng, US company Albemarle, Chile’s SQM, and China’s Tianq.