Australia's Lynas Rare Earths to buy Meteoric Resources for $672m
MELBOURNE - Australia's Lynas Rare Earths said on Thursday it would acquire Meteoric Resources in a A$968-million ($672-million) all-share deal for the Brazil-based miner, adding a new source of heavy rare earths to the top Western supplier.
Under the scheme of arrangement, Lynas will acquire all Meteoric shares at a fixed exchange ratio of 0.0207 new Lynas shares for each Meteoric share, a premium of more than 68% to Meteoric's last close.
The deal gives the world's biggest producer of rare earths outside China access to Meteoric's flagship Caldeira Rare Earth Project in Brazil, potentially widening its customer base at a time when Western governments are pushing the development of supply chains outside of China.
"What this does is create enormous flexibility and optionality in ... how we continue to grow, and how we give confidence to the market that we have the feedstock to be able to service the outside China market," said Lynas vice president of strategy, Daniel Havas.
Lynas will consider building downstream capacity in Brazil, and will update the market in due course, executives said.
Shares in Meteoric rallied as much as 56% to A$0.26. Lynas shares, however, were down 6.4% as investors questioned the benefits of the deal and the technical risk of processing a new feedstock.
Analyst Dylan Kelly of Terra Capital said he was concerned about the technical risk of Lynas processing a different type of material, ionic clay, and would have liked to have seen more details around synergies and cost benefits.
"The value proposition is not clear ... what are Lynas shareholders paying for here?" he said.
The acquisition comes after Lynas said in late August it planned to expand its global supply chain and secure new mine supply from project developers around the world.
It also comes during a succession process. Chairperson John Humphrey said he expected to announce Lynas' new CEO before the company's annual general meeting on November 25.
Former CEO Amanda Lacaze departed in June. Pol Le Roux is leading the company on an interim basis.
Lynas said it intends to work with Meteoric's existing team to advance development of Caldeira and expects capital expenditure for the development of the project to be more than $500-million.
The firm has also pledged to provide Meteoric with an interim funding facility of up to A$110-million to fund the continued development of the Caldeira project.
Meteoric's board has unanimously recommended the scheme in the absence of a superior proposal and subject to an independent expert concluding the transaction is in the best interests of shareholders.
