Piedmont Lithium (ASX:PLL, OTC:PLLTL) Inc. is set to merge with Sayona Mining Ltd (ASX:SYA) to create the largest North American hard rock lithium producer with geographically advantaged spodumene resources of global scale.
The merger will result in a simpler and stronger lithium business, MergeCo, that is well-positioned to grow through cycles.
Piedmont Lithium (ASX:PLL, OTC:PLLTL) and Sayona Mining already operate the North American Lithium (NAL) brownfield open pit mining operation in Quebec as a joint venture — Piedmont (25%) and Sayona (75%).
NAL is North America’s largest-producing lithium mine and one of the world’s few active hard rock spodumene operations supplying the market today, with nearly all of the operation’s power coming from clean and green hydroelectricity.
“MergeCo will be North America’s largest lithium producer and will have an attractive growth profile with three DFS-stage development projects and an exciting near-term brownfield expansion opportunity at NAL,” Piedmont Lithium president and CEO Keith Phillips said.
“This merger combines two complementary businesses and will create a larger and stronger company.”
A transformative step
Sayona CEO and managing director Lucas Dow added: “This merger marks a transformative step for Sayona and Piedmont, creating a leading North American lithium producer with the scale and capabilities to meet the growing demand for lithium products.
“We believe our combined resources and expertise will enable us to deliver significant value to our shareholders and stakeholders. We are excited about the opportunities this merger presents to accelerate our growth plans and enhance our strategic flexibility.”
The strategic rationale of the merger can be summarised as:
Creates largest hard rock lithium producer in North America with compelling growth profile -
- Currently the largest producing hard rock lithium miner in North America.
- Significant combined lithium ore reserve estimate totaling 70.4 million tonnes at 1.15% lithium oxide (Li2O) and mineral resource estimate totalling 153.5 million tonnes at 1.15% Li2O (measured and indicated) and 51.4 million tonnes at 1.07% Li2O (inferred).
- Three high-quality development projects and the potential for brownfield expansion of NAL.
Economic alignment to pursue NAL brownfield expansion -
- Consolidated NAL offtake economics.
- Early, internal studies commenced, underpinned by a significant resource base.
- Low capital intensity with a lower cost base and shorter permitting process than identified greenfield projects.
Simplified corporate structure and shared benefits of synergies -
- Optimised logistics and procurement with potential to deliver lower operating costs.
- Marketing synergies expected through significantly expanded customer relationships.
Strengthened balance sheet with ability to fund and accelerate growth projects -
- Capital raising provides MergeCo with funding runway to operate.
- MergeCo go forward funding strategy is expected to focus on introducing strategic project-level partners with technical and funding capability and progressing non-dilutive sources of funding.
A well capitalised entity
The parties signed a definitive agreement to combine the two companies that will result in a significantly strengthened balance sheet, with Sayona being the ultimate parent entity.
This transaction will result in an approximate 50%/50% equity holding of shareholders of Piedmont and Sayona in MergeCo and is expected to close in the first half of next year.
The parties are undertaking two-stage equity financing, with a post-merger raise led by cornerstone subscription from Resource Capital Fund VIII L.P, which is associated with Resource Capital Funds (RCF) — a critical minerals and mining-focused global investment firm.
Piedmont plans to undertake a ~US$27 million capital raise, while Sayona will seek to raise A$40 million (~US$27 million). Once the transaction closes, Sayona will also undertake a conditional placement for A$69 million in MergeCo to Resource Capital Fund VIII L.P.
The equity raisings, of around US$99 million all up, should ensure MergeCo is well positioned to accelerate growth within its enlarged portfolio.
Piedmont says that MergeCo will endeavour to complete an additional equity raise for eligible retail shareholders post-closing.
“The merger financing, cornerstoned by leading mining private equity group RCF, will enable us to weather the current industry downturn while making intelligent investments in our growth projects to be positioned for the recovery in lithium markets that we expect in the medium-term,” said Phillips.
“MergeCo will be domiciled in Australia but will maintain a listing on Nasdaq and a strong commitment to our Carolina Lithium Project and our US headquarters in Belmont, North Carolina.”
Upon completion of the merger, Sayona’s Lucas Dow will become the CEO and managing director of MergeCo and Piedmont’s Keith Phillips will become a strategic advisor for a transition period.