Chinese investment firm Nextview New Energy Lion Hong Kong Ltd. is moving to acquire the raw material needed to produce batteries for electric vehicles by scooping up Lithium X Energy Corp. [LIX-TSXV, LIXXF-OTC] in an all-cash deal worth $265 million or $2.61 a share.
The deal underscores the high degree of investor interest in lithium, which is being driven by the commodity’s key role as an ingredient in the production of lithium ion batteries for energy storage and the electric vehicle sector.
Last week, Nextview said it had acquired a 20% stake in Bacanora Minerals Ltd. [BCN-TSXV, BCN-AIM] via a $53.5 million private placement deal. In return, Bacanora has agreed to supply the Chinese firm with up to 7,000 tonnes annually of lithium carbonate from its Sonora Project in Mexico.
Lithium X is an exploration and development company with two projects in Argentina’s Lithium Triangle. It is also a player in Nevada’s Clayton Valley, via its 19% interest in Pure Energy Minerals Ltd. [PE-TSXV, HMGLF-OTC, AHG1-FSE].
NextView is an active investment firm with offices in Beijing and Shanghai. It manages over RMB30 billion in assets and invests in new energy, resources, transport, sports and consumer products.
Under an agreement that was announced December 18, Nextview will acquire the common shares of Lithium X for $2.61 a share and also acquire all of the company’s outstanding warrants, paying $0.01 for each warrant. This amounts to a 29.4% premium on the 20-day volume weighted average trading price of Lithium X shares during the period ended December 15, 2017. It also marks a 22.5% premium on the closing price of Lithium X shares on the TSX Venture Exchange on the same date. On Thursday, December 21, Lithium X shares were trading at $2.48, in a 52-week range of $2.54 and $1.40.
Lithium X’s flagship project is the Sal de Los Angeles lithium brine project in Argentina. It hosts a NI 43-101-compliant indicated resource of 1.037 million tonnes of lithium carbonate equivalent. On top of that is an inferred resource of 1.007 million tonnes of lithium carbonate equivalent.
It has a second lithium brine project in Argentina, known as the Arizaro property. It consists of 33,846 hectares and covers part of the western and eastern portions of the Salar de Azario, one of the largest known salt lakes in the world.
In Nevada, the company has consolidated its holdings with those of Pure Energy, which is developing a lithium project in the Clayton Valley. According to a preliminary economic assessment, the project could generate average annual production of approximately 10,300 tonnes of lithium hydroxide or 9,100 tonnes of lithium carbonate equivalent.
The proposed acquisition will be completed by way of a plan of arrangement, which is subject to approval by 66 and two-thirds of the votes cast by Lithium X shareholders and warrant holders at a special meeting of shareholders. The meeting is scheduled for February 2018.
The agreement has been unanimously approved by a special committee of independent directors of Lithium X, and by the company’s full board of directors.
The arrangement is also subject to a $15.9 million termination fee if the deal is terminated under certain circumstances. A reverse break fee of $20 million will also be payable by Nextview in circumstances in which the arrangement is not completed as a result of a default by the Chinese investment firm. The reverse break fee has been secured through the deposit of US $16 million in trust with Lithium X’s counsel in Hong Kong, subject to the terms of an escrow agreement under which those funds may not be released without the consent of both parties.