Another twist in the battle for lithium miner Alita as debt holder backflips on firing administrator
The China-connected debt holder trying to take control of Alita Resources – one of only six in-production lithium miners in Australia – has backflipped on firing McGrathNicol.
Austroid Corp, the sole debt holder of lithium miner Alita Resources, has backtracked on its bid to fire administrator McGrathNicol and replace it with KPMG.
Austroid has been frustrated that its efforts to take ownership of the lithium miner have still not been realised, some three years after signing a deed of company arrangement (DOCA) with McGrathNicol, mostly due to the Foreign Investment Review Board failing to rule on it.
In that time, lithium prices have trebled and the value of Alita has gone from zero to more than $1.4bn, according to a report presented to the West Australian Supreme Court by Alita shareholder Canaccord.
Thursday’s bizarre court backflip by Austroid is just the latest in the odd story of Alita – one of only six lithium miners in production in Australia – which failed in 2019 when commodity prices slumped and the Chinese company contracted to buy lithium from its Bald Hill mine halted its purchases.
Lithium is critical for making batteries used to power cars.
When Alita failed in 2019, China Hydrogen Energy (CHEL) stepped in and purchased the debt that year and made an application to the FIRB to take control of the company, but withdrew it in April 2020 when then treasurer Josh Frydenberg indicated he may move to block the deal.
CHEL, which is registered in the Cayman Islands, then sold the same debt to Austroid, which shares the same registered director – Mike Que. Tenement records held by the WA mines department show that CHEL retains a mortgage over the Bald Hill mining and exploration tenements. The mortgage was registered in early 2020 and remains in place.
Mike Que is also a director of the subsidiary company now running the Bald Hill mine and selling its lithium to a Hong Kong-based shell company for some 60 per cent below current market rates in a deal locked in last year when prices were lower.
This was all done with the oversight of McGrathNicol as administrator.
In court on Thursday, Austroid, which had called for the hearing to fire McGrathNicol, said it would no longer take this step, and after the hearing claimed it had only been planning to do so because of undisclosed claims by Canaccord and its legal firm, Arnold Bloch Leibler.
“ABL and Canaccord have not made any further allegations,” an Austroid spokesman said.
“That being the case, and given that Austroid considers the allegations to be baseless and without merit, Austroid saw no reason to move on the resolution for replacement.”
While Austroid did not specify the allegations, Canaccord has successfully argued in court that equity holders in Alita should have the right to share in the upside of the company because the DOCA has not been completed since its 2020 signing.
That case, which Austroid tried to have struck out, will be heard by the court later this month and Canaccord will argue there has been undue delay in Austroid completing the deal, and that the administrator should be acting for debt holders and for members – in this case equity holders.
If Canaccord is successful, the company will be liquidated.
In court on Thursday, Austroid asked for and was given another extension to complete the deal, this time until June 30, 2023.
This would be “to allow the deed administrators enough time to obtain an independent expert’s report as to the value of Alita’s assets and a short period of time to consider that report,” Austroid’s spokesman said.
It is unclear when the FIRB will make its ruling.