Neo Lithium Corp (TSX-V:NLC) told investors that it has entered into a definitive agreement which will see Zijin Mining Group Co. acquire all the company's outstanding stock for $6.50 per share in cash, or a total of $960 million.
Zijin is offering Neo Lithium’s shareholders a premium in return for the company’s flagship 3Q lithium brine project in Argentina’s Catamarca province, one of the largest and highest-grade projects of its kind in the world.
Shanghai Stock Exchange-listed Zijin is one of the largest mining companies in China as well as a leading global gold and copper producer. It manages an extensive portfolio, primarily consisting of gold, copper, zinc, and other metals through investments in China and twelve overseas countries across Europe, Central Asia, Africa, Oceania and South America.
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"After a thorough strategic process, we are very pleased to provide this all-cash premium offer to our shareholders from a leading global mining company,” Neo Lithium president and CEO Waldo Perez said in a statement.
“This is the result of the collective work of our premier lithium brine exploration team, starting from initial discovery in late 2015 to defining one of the largest and highest-grade lithium brine deposits in the world, and culminating in this premium offer in just six years. We believe that it is now time for our project to proceed to the construction and production phases with Zijin, a leader with a track record of developing assets in a responsible manner respecting the interests of local employees, communities and authorities,” he added.
Neo Lithium said its board of directors has unanimously approved the deal following the unanimous recommendation of a special committee of independent directors. In an opinion to the board, Cormark Securities said the offer, which represents a 36% premium to the 20-day volume-weighted average price of the company’s shares, is fair from a financial point of view.
“The 3Q project represents an important addition to Zijin's growing global asset mix and it is a good choice for Zijin to enter the field of new energy minerals,” said Zijin chairman Chen Jinghe. “Thanks to the professional team's efforts and input in the early stage of the project, we are confident that together with Zijin's strong financial resources and mining know-how, we will develop this excellent asset into one of the world's leading lithium carbonate producing mines.”
Zijin said it is committed to retaining the current management and professional team at LIEX SA, Neo Lithium's local operating subsidiary, as well as making contributions to economic and social developments in Catamarca province, as it moves forward to advance the development of the 3Q project.
The transaction will be completed through a plan of arrangement and needs the approval of shareholders holding at least two-thirds of Neo Lithium’s stock. It is also subject to government, regulatory, court and stock exchange approvals, including the relevant authorities in China.
The arrangement agreement includes, among other things, a customary non-solicitation covenant on the part of Neo Lithium and a right for Zijin to match any competing offer that constitutes a superior proposal.
Under certain circumstances, Zijin would be entitled to a US$35 million termination fee and Neo Lithium would be entitled to a US$35 million reverse termination fee.
The shareholder meeting to vote on the deal is expected to take place in December.
Contact the author at stephen.gunnion@proactiveinvestors.com