At the time of writing, Kidman Resources’ share price is trading 44.44% higher, at $1.86 apiece.
Naturally, Wesfarmers’ share price is a little flat after the bid, down slightly by .14%, to $35.65 apiece.
The offer was announced Thursday morning, upon winning the backing of Kidman’s board and joint venture partner. It follows Wesfarmers’ $1.5 billion bid for rare-earth miner Lynas Corporation Ltd [ASX:LYC].
Wesfarmers’ resource focus aids Kidman Resources’ share price
Now more than ever, people are looking for alternative ways to power our way of life. The emerging energy market we are seeing today has thrusted lithium miners in high demand.
Currently, Kidman has a 50% stake in a lithium project in Mount Holland, Western Australia.
The project includes an under-construction mine, as well as a lithium hydroxide refinery in Kwinana.
It seems Wesfarmers’ new resource focus is helping Kidman Resources’ rising share price, as the company is seeking to diversify itself and move out of supermarket chain Coles. Last year, Wesfarmers shed most of its stake in the grocery giant.
Wesfarmers currently owns retail chains Bunnings, Kmart, Target and Officeworks.
Wesfarmers boss, Rob Scott, commented on the takeover:
‘The acquisition of Kidman provides an opportunity to invest in and develop a large-scale, long-life and high-grade lithium hydroxide project.
‘It also creates a unique partnership with SQM, a global leader in the lithium industry with a long operating history and deep market knowledge.’
In support of the deal is the world’s largest lithium producer, and Kidman’s joint venture partner, the Chilean group Sociedad Química y Minera (SQM), as reported by The Sydney Morning Herald.
Kidman Resources waiting on shareholders
Currently, Kidman’s board members and members of its key management already support the takeover — granted, there is no better offer put forward.
Together they make up about 17% ownership of Kidman shares.
But in order for the take-over to go ahead, the deal needs the support of the remaining Kidman Resources shareholders.
With the extra muscle coming from Wesfarmers, investors could see further shifts to Kidman Resources’ share price, as funding for further lithium mining begins to pick up.
But regardless, the growing demand for alternative energies — and especially the use of lithium — could, or at least should, breed more upside potential for investors.
For Money Morning
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