Millennial Lithium (ML.V) – Merger Arbitrage – 8% Upside

Current Price: C$3.32

Offer Price: C$3.6

Upside: 8%

Expiration Date: Q4 2021

Press Release


Junior lithium miner Millennial Lithium has signed a definitive all-cash agreement to be acquired by Ganfeng Lithium at C$3.6/share or C$353m in total. Ganfeng with $35bn market cap is one of the largest lithium producers in the world and has made similar acquisitions recently. The transaction is subject to 2/3rd shareholders' consent and regulatory approval from Chinese and Canadian authorities - all of which are likely to pass. Shareholder meeting is expected in Sep'21 and closing in Q4'21. Downside to the pre-announcement price stands at ~14%.

Management supports the deal with its 17% stake and other shareholders should also be incentivized to cash out in order to avoid further dilution. ML has already increased the sharecount by almost 5x  during the last 5 years and management has stated that further dilution is expected as the company is nearing the construction phase of its main project - Pastos Grandes.

Canadian regulatory approval should also go through given that ML's assets are not even in Canada, but Argentina. The market seems to agree on this as otherwise, the spread would likely be wider - after the announcement, the initial spread hovered around 3% and increased to the current levels just recently.

The acquisition comes during the lithium industry consolidation and amidst the general industry tailwinds due to the fears of the upcoming lithium supply shortage. Besides ML, Ganfeng has already announced 3 other acquisitions this year (here, here, and here), with the latest one also in Argentina - 35% interest in the Sal de la Puna lithium brine project. The strategic rationale with ML seems sound - both ML assets (Pastos Grandes and Cauchari East) are very close to Ganfeng's Sal de la Puna lithium project and Cauchari-Olaroz (co-developed by Ganfeng and Lithium Americas). Moreover, Ganfeng has recently received a green light for its 20k tonnes lithium chloride plant in Argentina. All in all, ML with its advanced stage Pastos Grandes project (expected to produce 24k tonnes per year) is a highly synergistic transaction and the buyer should be very incentivized to close the deal (PR):

Millennial’s 100%-owned Pastos Grandes Project is an attractive, advanced stage lithium project and is in our view highly complementary to our existing footprint in Argentina.

Worth noting that the offer agreement also includes a “fiduciary out” that allows Millennial to accept a superior proposal, subject to a “right to match” period for Ganfeng.


Millennial Lithium

The company owns 100% in two Argentinian lithium mine projects:

  • Pastos Grandes - an advanced-stage project in Salta Province, Argentina. According to the Feasibility Study (done in 2019), the mine is expected to produce 24k tonnes per year and has a 40 years mine of life. Pilot plant is already operating and has produced 99.96% pure battery-grade lithium carbonate. Full construction is expected to start in mid-2022.
  • Cauchari East - preliminary stage exploration project in Jujuy Province, Argentina.

Pastos Grandes timeline:


  1. Ilja

    Thanks. The only reassurance here is that ML’s assets are not in Canada. This should limit the risk somewhat.

  2. Cerberus

    With regards to the risk / reward characteristics of this trade I would like to make some additional points:
    1) Downside risk: Lithium prices increased quiet substantially since the deal was announced on 16. July 2021. Therefore lithium producers such as Gangfeng Lithium, Lithium Americas, Neo Lithium Corp, etc. have also increased substantially. The increase is quiet substantial and it could be that there is positive break risk. Meaning that you even profit more if the deal breaks.
    2) Potential additional upside: The same buyer has also signed a definitive agreement with Bacanora Lithium on 25/8/2021 and had to bump the price (compared to the initial proposal in May 2021). I have the feeling that there could be also an increased offer in the ML price since shareholder could vote against the transaction when there is positive break risk.

    Would be interesting to see what others think on the downside of this trade.


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