QUICK HIT: Lithium Chile - A Potential Buyout in the Works?
Last October I put out my first piece on Lithium Chile (TSXV:LITH) describing the potential of the company and its Arizaro Project. In November, I put out a follow up article telling subscribers to focus on the blue sky potential and ignore the political noise in between.
At the time of writing, $LITH was trading around $0.55 and today, the stock is hovering just below $1.00, a nice +70% gain for those who bought in.
The main focus of my previous article was on the governments order for Chinese investors to divest from Lithium Chile under tougher foreign investment rules around the nation’s critical minerals sector, and also how they did not have right to do so.
More recently, the Government has essentially reversed that order... "If you start looking backwards at investments, it will create all kinds of uncertainty about whether an investment is ever really an investment," Natural Resources Minister Jonathan Wilkinson said in an interview late on Tuesday on the sidelines of Prospectors and Developers Association of Canada (PDAC) conference in Toronto.
THE ARIZARO PROJECT
Going back to Lithium Chile, the company has made a ton of progress on the Arizaro property itself which includes positive metallurgy, additional drilling results, and most importantly, an updated resource estimate which increased total resources over 81%, bringing Total Indicated Resource to 1,337,000 and Inferred Resource to 1,250,000 Metric Tonnes of LCE.
Over PDAC, there seemed to be a lot of chatter going on about a potential buyout and low and behold, the company was halted yesterday. This morning, the company put out a pretty vague NR which announced they have had an expression of interest for the acquisition of certain properties.
If I had to guess, this interest is likely being directed towards the Arizaro property, given that the updated resource estimate has boosted its attractiveness for larger lithium companies looking to tack on more resources. Of all the properties in LITH’s portfolio, Arizaro is the only one that is really developed enough for a take-over at this point in time.
I imagine there are plenty of companies that would benefit from the acquisition of Arizaro, but the main one that comes to mind for me is Chengxin Lithium Group or other aligned parties with Chengxin… which I touch on in a bit. Chengxin was a major shareholder of Lithium Chile and is the same group that was asked to divest from the project last year.
When Chengxin ultimately divested their position in Lithium Chile, it was purchased by a firm called “Gator Capital”. Looking closely at filing statements by Gator Capital, it appears there may be a link between the two. Gator opened up shop just a few weeks before the divestment and noone on the street seems to know of them or have heard of them previously… very interesting. Whether or not the acquisition will be done by Chengxin or Gator Capital is yet to be seen but I strongly believe it will be one of these two.
Although they were forced to sell their stake in Lithium Chile (the Canadian company and holder of Arizaro), there may be a way for them to take control of Arizaro without directly owning or purchasing Lithium Chile, which would be to go after the asset directly, through Gator Capital.
I have also heard seen some rumours that Tesla might be interested in the project but I believe these are just far-fetched rumours based on nothing but over-optimistic speculation.
We will have to wait and see, but I do believe we will see another announcement soon once acquisition terms have been reached.
Keep on eye on this one.