Despite the recent asset scramble in the Pilbara, the CEO of Arcadium Lithium said his company will steer clear of the fight until the dust settles on current valuations, according to reports.
Arcadium Lithium, which formed following the signing of a $US10.6 billion ($15.7 billion) definitive agreement to merge Allkem and Livent, will be headed up by Paul Graves in the near future.
While large players like MinRes, Hancock and SQM have thrown themselves into a WA lithium buying frenzy in recent months, the US-based Graves believes it is very early days in the Australian sector.
As such, he is willing to take a step back and watch where the chips fall before engaging, believing the current assets may be valued too highly. However, Graves said is willing to be “aggressive” once the company better understands the situation.
“There’s a massive disconnect today – massive – between the value someone’s ascribing to a very, very, very early stage, or technically challenging, projects in Australia with only a maiden resource (and) without full ownership,” Graves said, according to the Australian Financial Review.
“There’s a lot of value being assigned to those by various people down there in Australia and so (it’s) a little challenging to me, to be perfectly honest, to know where the Australian M&A (mergers and acquisitions) market plays out.”
While it may initially seem strange that a new lithium miner does not want to make big moves, Graves’ strategy could pay off if the lithium assets up for grabs don’t make as much profit as first thought.
MinRes snapped up a 19.8 per cent stake in up-and-coming Wildcat Resources last week, along with raising its stake in Azure Minerals to 12.3 per cent – right as it is set to be acquired by SQM for $1.63 billion.
A leading player in the lithium frenzy is Gina Rinehart’s Hancock Prospecting, which acquired an 18 per cent strategic stake in Azure Minerals’ ordinary shares last week.
The Azure move came on the heels of Hancock acquiring 19.9 per cent of Liontown Resources, which is said to be was part of the reason Albemarle walked away from its $6.6 billion takeover of Liontown, although Albemarle cited the downward trend in lithium prices as the main reason for its withdrawal.
As a result, Albemarle is scaling down production at the Greenbushes mine in WA and has said it is finished participating in the WA lithium frenzy.
It remains to be seen if Arcadium Lithium will pick up where Albemarle left off.
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