Impact: Very Positive
Latin Resources has entered into a binding agreement with Pilbara Minerals Ltd (ASX:PLS, Not Rated) whereby Pilbara is to acquire 100% of LRS, in an all-stock deal for 0.07 Pilbara shares for each Latin share. Based on Pilbara’s last pre-announcement closing price of A$2.85/sh, the offer implies a value of ~A$0.20/sh for Latin. We believe this is a very positive development for LRS shareholders, as it provides immediate access to Pilbara’s Pilgangoora Li operation in Western Australia, offering exposure to one of the largest, hardrock Li producers, against the backdrop of a challenging lithium market. With ~A$1.6B in cash, Pilbara has the means to fund Salinas’ estimated ~US$253M Phase 1 capex and bring it into production (read note). We expect Latin shareholders to vote in favour of the deal (unless a superior offer is received) and therefore change our rating to TENDER (was BUY, A$1.35/sh target price.
