Azure Minerals Ltd (ASX:AZS) is trading higher with its lithium potential attracting the interest of global lithium producer Sociedad Química y Minera de Chile S.A. (SQM) via its wholly-owned subsidiary SQM Australia Pty Ltd.
SQM will make a major cornerstone investment of up to A$20 million to acquire a 19.99% interest in AZS through a two-stage transaction – a strong endorsement of the potential of Azure’s Andover Project (60% Azure/40% Creasy Group).
SQM’s initial investment is for A$4.2 million and, subject to the satisfaction of certain conditions precedent, SQM will invest a further A$15.8 million to hold its 19.99% interest.
Azure shares have been as much as 37.8% higher in early trade to A$0.31.
The lithium producer will invest at a price of A$0.2564 per share, which represents premiums of:
- 13.9% to Azure’s last traded price of A$0.225 per share on January 6, 2023; and
- 12.4% to Azure’s 10-day VWAP of A$0.228 up to and including January 6, 2023.
Significant milestone
Azure’s managing director Tony Rovira says the investment puts Azure in a strong position moving forward at Andover.
“We’re very pleased to welcome SQM as a substantial and strategic investor in Azure, which demonstrates their strong interest and belief in the lithium potential of the Andover Project,” Rovira said.
“This is a significant milestone event and is a strong endorsement of Azure and our projects by one of the world’s leading lithium producers.
"The new relationship will allow Azure to draw upon SQM’s technical expertise in pegmatite-hosted lithium exploration, project development, production and marketing, providing Azure with strong support as we look to develop the Andover lithium assets.
“Azure is now in a very strong financial position and, following completion of both tranches of the transaction with SQM, Azure will have a cash balance of more than $25 million which will be used to accelerate lithium exploration through a program of intensive drilling across the Andover Project.”
About SQM
SQM is one of the world’s largest lithium producers and is a global mining and chemical company with operations in Chile and Western Australia. It is a global leader in lithium, potassium nitrate, iodine and thermo-solar salts markets.
In Western Australia, SQM and Wesfarmers Ltd (ASX:WES) are joint venture partners in the Mt Holland lithium project, which will be a unique, fully integrated operation producing battery-quality lithium hydroxide.
The joint venture comprises a mine and concentrator at Mt Holland and a refinery at Kwinana capable of producing approximately 50,000 tonnes of lithium hydroxide per year.
Transaction terms
Completion of the second tranche of the transaction is subject to the satisfaction of several conditions precedent including:
- SQM having notified Azure that it has completed and is satisfied with its due diligence investigations into Azure;
- SQM and Azure having entered into an offtake agreement under which SQM is entitled to an offtake right in respect of 25% of all lithium product in which Azure has an interest on arm’s length and commercially competitive terms.
- Under the terms of the subscription agreement, on and from completion of the second tranche and until such time as SQM no longer holds a voting power of 10% in the issued capital of Azure for three consecutive months, SQM will have:
- the right to appoint a director to the board of Azure;
- the right to form, with Azure, a technical committee to assist and advise in the exploration and development of Azure’s lithium projects;
- the offtake rights under the offtake agreement;
- the right to be given notice of proposed future equity issues with Azure having to negotiate in good faith to identify whether the terms on which SQM may participate in such equity issues can be agreed; and
- a pre-emptive right to participate in any debt funding transaction or any royalty agreement, streaming agreement or pre-payment agreement proposed to be undertaken or entered into by Azure.
Azure will use the money raised from the transaction to accelerate lithium exploration on the Andover Project with a priority to undertake a substantial reverse circulation and diamond drilling program to determine the scale of the mineralisation already mapped and sampled at surface.
The company will also start early-stage metallurgical, heritage, environmental, hydrological and flora and fauna studies.
Andover is in the West Pilbara region of WA and gives Azure strong exposure to nickel, copper, cobalt and lithium necessary for the transition to industry decarbonisation, electrification and battery storage.
Azure has already discovered two nickel-copper-cobalt deposits at Andover and released a maiden mineral resource (MRE) for the Andover Deposit of 4.6 million tonnes at 1.11% nickel, 0.47% copper and 0.05% cobalt (1.41% nickel-equivalent), containing 51,700 tonnes of nickel, 21,700 tonnes of copper and 2,290 tonnes of cobalt.
A second MRE for the Ridgeline Deposit is due in Q1 2023.