Australia miners merge, hope to boost lithium sales

By James Regan
SYDNEY, May 30 (Reuters) - Galaxy Resources GXY.AX and
General Mining GMM.AX on Monday agreed to a A$216 million
($155 million) merger to consolidate their lithium mines in
Australia, Canada and Argentina, with prices for the metal
soaring on growing demand for electric vehicles.
The offer, swapping one General Mining share for 1.65 new
Galaxy shares, is the latest in a push by Australian-listed
companies to mine lithium, essential in powering non-internal
combustion engines and led by companies such a Tesla Motors
TSLA.O , Nissan 7201.T and BMW BMWG.DE .
The deal, announced by both firms during a call with media,
is also aimed at assembling an institutional investment-grade
company capitalised at around A$700 million to provide large
investors with a way into Australian lithium, where most players
are little more than penny stocks.
Shares in Galaxy and General Mining have appreciated some
1,100 percent and 1,400 percent respectively over the past year
on the back of the boom in lithium.
Australia has seen a stampede of proposals to mine lithium
in the past 12 months, with more than 20 companies in various
stages of development in the Pilbara region of Western Australia
state alone.
Lithium prices have risen to over $20,000 a tonne from about
$7,000 a tonne last September, according to metals consultancy
CRU.
Industry website Asian Metal says lithium carbonate, the
compound used in batteries, has jumped by 76 percent in the past
12 months.
"The price of lithium today is incentivising companies to
produce," said Shaw and Partners analyst Peter O'Connor. "People
are coming out of the woodwork with lithium."
General Mining Managing Director Mike Fotios said he did not
see oversupply emerging anytime soon.
"The rate by which we see new projects coming onstream in
Australia and Canada, we only see the market reaching something
like equilibrium in the next four to five years," Fotios said.
Goldman Sachs (NYSE:GS) estimates that a 1 percent rise in
electric-battery consumption will increase lithium demand by 45
percent.
"More and more and companies see an opening in lithium and
that's driving mergers and partnerships in Australia," said
Michael Hannington, exploration manager for Metalicity Ltd
MCT.AX , which is accelerating a A$1 million programme to find
more lithium in Australia.
Pilbara Minerals PLS.AX last month raised A$100 million to
pay for exploration for a new mine in northwestern Australia,
while Orocobre Ltd ORE.AX expects to reach full production at
a mine in Argentina by September.
Canaccord Genuity is the sole financial advisor on the
Galaxy and General deal.
($1 = 1.3957 Australian dollars)