After months of offers, rejections and negotiations, this week it will be decided whether Argentine industrial conglomerate Techint will enter the lithium business through its energy arm, Tecpetrol.
Friday, October 20, is the deadline for the Canadian company Alpha Lithium to accept Tecpetrol’s final acquisition offer, since “no further extensions will be contemplated.” Techint aims to invest almost US$800 million in a vast lithium project in the Salar de Tolillar, in Salta.
Techint’s attempt to expand into the lithium business has gone on for over 300 days. But, officially, the first announcement to make a cash tender offer directly to Alpha Lithium Corporation’s shareholders was made on June 2 of this year, “after Alpha’s refusal to negotiate,” according to Techint. At the time, Tecpetrol announced its intention to make a formal offer “directly to the shareholders” to acquire all the shares issued by Alpha.
Alpha Lithium Corporation is a Canadian company that operates in Argentina as Alpha Lithium One. It owns the 27,500-hectare concession in the Salar de Tolillar, in Salta province, and 5,072 hectares in the Salar del Hombre Muerto, in Catamarca. Globally, Alpha’s shareholder base is comprised of a large number of retail investors.
Recommendation to shareholders
On September 28, Alpha Lithium’s board of directors issued a unanimous recommendation to its shareholders to accept Tecpetrol’s offer, based on an analysis by its external financial advisor. As the recommendation was announced with only two business days remaining until the offer expired, Tecpetrol extended the deadline for acceptance to 5:00 p.m. (Vancouver, Canada time) on October 20, 2023. “No further deadline extensions are contemplated,” a source at the company said.
“It is key that these shareholders do not remain passive and complete the process to accept the offer as soon as possible, to reach the minimum legal threshold of more than 50% of the outstanding shares, which will allow for Tecpetrol’s offer to be completed and for Alpha’s shareholders to effectively benefit from the offered price,” a Tecpetrol source added.
The final offer was CA$1.48 (US$1.08) in cash per share, representing “the best and final offer,” Tecpetrol said. At the beginning of June, the first price was CA$1.24 per share. The company said that “the price offered is the highest at which the company has traded in the last two years.”
Tecpetrol added that share prices could fall if the deal does not close. “Since the announcement of Tecpetrol’s offer in May, the share price of similar lithium development companies has fallen 43%, while, as of October 3, 2023, Alpha is up 22%, with the offer acting as a support for the share price. If a sufficient number of shares are not received by October 20 to reach the minimum legal threshold, Tecpetrol’s offer will fall, in which case it can be expected that Alpha Lithum’s share price will suffer significant deterioration.”
In Tecpetrol’s final message to the shareholders, it says that if it moves forward with the purchase of the shares, it will invest US$777 million in the construction of the Tolillar project, in Salta. It describes it as a “risky and uncertain” investment. This project is currently in the “advanced exploration” phase, according to the Mining Secretariat. According to Tecpetrol, its intention is “in line with its energy transition strategy, to responsibly develop these premium lithium assets as part of the integrated western battery supply chain”.
For the time being, Alpha Lithium has moved forward with the construction of a pilot plant in Tolillar, with a production capacity of 120 tonnes per year. However, its ultimate goal was production of 50,000 tonnes per year. This is nearly double Argentina’s annual lithium export record of 27,500 tonnes, in 2022.
Of the 27,000 hectares, Alpha has explored 32%, according to information the company published at the end of 2022, the most recent available. That means a preliminary estimate of 2.11 million tonnes of “indicated resource” and 1.16 million of “inferred resource.” A further 18,500 hectares have yet to be explored.
In its message to shareholders, Tecpetrol said it already has the acceptance of Caravel Capital, which has 4.5 million Alpha shares. This investment fund, located in Bahamas, published an open letter at the end of September calling on Alpha’s shareholders to accept Tecpetrol’s offer. The letter said that Alpha and its advisors “have been unable to find another buyer for ALLI’s shares at superior terms than those offered by Tecpetrol, despite having had nine months to do so. Despite earlier speculation of an asset sale for Tolillar at a C$400 million price tag, the fact is that no such transaction has ever materialized.”
Techint’s proposal is for some US$210 million. In September, the company was valued at US$188 million.