Glencore bids for lithium miner Alita, proposes $1.8bn listing

The commodity giant could be the white knight for shareholders in failed lithium miner Alita, offering to buy its debt and relist for $1.8bn.

Global mining giant Glencore has lobbed a secret deal to buy all the debt in controversial lithium miner Alita Resources and relist the company for about $1.8bn, according to secret documents obtained by The Australian.

Alita owns one of Australia’s only in-production lithium mines – Bald Hill – and has been in the hands of administrators since 2019 when the price of the commodity critical to the world’s electrification slumped.

Its shares were delisted in Australia but remain frozen on the Singapore Stock Exchange. Since then, a China-connected company that purchased the Alita debt has been selling the lithium from Bald Hill to a Hong Kong shelf-company for as much as 60-plus per cent below market rates.

Glencore has provided a term sheet to Alita administrator McGrathNicol, which The Australian has obtained, which offers to buy all of the secured and unsecured debt in Alita and its subsidiaries and relist the company to the effect that it pays 1 cent per share for a 15 per cent stake.

The Glencore joint bid with Sagex Capital is for $120m “or other such amounts required to clear senior and unsecured admitted claims.”

The total amount of debt in Alita is known to be $272m, including the $47m that the Chinese company China Hydrogen Energy (CHEL) paid for the debt when the company collapsed, before selling it onto related company Austroid.

For the streams of angry shareholders in Alita the bid by Glencore should come as a relief.

Except that they were not told about the proposed deal by the administrator.

Last month, the Foreign Investment Review Board rejected a bid for the current debt holder Austroid to convert its loans into ownership of the company through a Deed of Company Arrangement.

One week later Glencore approached McGrathNicol about buying the debt and relisting the company, but its advances were ignored and earlier this month the administrator said in an update to shareholders that it had agreed to give Austroid another two weeks to get the deal done. That extension expires on Thursday.

McGrathNicol partner Rob Kirman said he would not comment on any questions relating to Alita.

Glencore’s interest in the Bald Hill mine comes as the developed world scrambles to meet their net-zero emissions targets. Lithium is the key component in batteries used for electric vehicles.

Prices for high-grade lithium such as Bald Hill produces have surged to more than $US6000 per tonne in the past twelve months. The current market rate is $US3740 per tonne, having eased on a slowdown in demand from China, but is still more than double the $US1500 per tonne rate that Alita is selling it for.

Under the Glencore proposal, the equity holders, many of whom had thought their investment in Alita was lost, would once more have liquid shares in one of only six Australian lithium producers.

Given McGrathNicol failed to inform shareholders of the Glencore bid, it is also unclear how many other companies have made offers to purchase the debt.

It is known that Allkem is interested in grabbing control of Bald Hill. The ASX-listed Allkem is preparing for a merger with New York-listed Livent Corp in a $US10bn deal, forming the world’s fifth-largest lithium producer.

Allkem’s interest in Bald Hill is longstanding, with the company’s Galaxy unit having been the underbidder for Alita’s debt, which sold to CHEL for $47m and then on-sold to related party Austroid.

Allkem’s Mt Cattlin mine near Ravensthorpe in Western Australia is about 450 kms from Alita’s Bald Hill mine, and the two store their lithium at side-by-side bays at the Port of Esperance.

Combining the two would make sense from a cost perspective and give Allkem access to higher grade lithium.

Allkem has just settled a dispute that saw it take ownership of Alita’s Madoonia exploration tenements, something that it revealed in an investor briefing, but had not been disclosed to Alita shareholders by McGrathNicol.

Allkem told shareholders this month that it was looking to expand further through acquisitions or exploration in Australia.

It’s also understood that LG Group, South Korea’s fourth-largest conglomerate, approached Austroid about purchasing 90 per cent of the debt for $500m.

Glencore’s interest in lithium has ramped up recently. While the company doesn’t currently mine lithium it does trade it as a commodity, and last month it agreed to pay $USD400m to French company Eramet to help fund its lithium processing plant in return for access to supply from its Argentinian mines.

So concerned are car manufacturers about the future supply of lithium, that many, including Ford and General Motors, are locking in direct deals with miners.

Australia is currently the world’s biggest exporter of lithium and considered on of the “greenest” producers. The big guns in lithium, being Albemarle, SQM, Ganfeng Lithium and Tianqi Lithium, all have a presence in Australia. Lithium is also found in South America, Canada and China.