It has been a fantastic start to the new year for the shares of mineral exploration company Birimian Ltd (ASX: BGS).
Its shares have come out of a trading halt today with a 21% gain to 40 cents following the announcement that it has received an offer for its Bougouni Lithium Project.
The $107.5 million cash offer from China-based Shandong Mingrui Group appears to have met the approval of the Birimian board. They have signed a letter of intent for its sale and plan to seek shareholder approval once the deposit has been received.
The Mali-based project is home to the Goulamina lithium deposit. The mineral resource holds an estimated 15.5 million tonnes at 1.48% lithium oxide.
Whilst that grade pales in comparison to the 6% lithium oxide Galaxy Resources Limited (ASX: GXY) produces at its Mt Cattlin Project. It is still a considerable deposit at a time when lithium demand remains incredibly strong.
So an offer of $107.5 million seems a little low in my opinion for the asset and I'm surprised to see the board push ahead with it. Especially without any kind of royalties included as part of the deal.
Whilst shareholders will ultimately get to vote on the deal, I don't believe they have enough sway to stop the transaction from going ahead. In the meantime shareholders might want to cross their fingers that a better offer comes in.
I would suggest investors looking for exposure to the lithium boom consider an investment in Galaxy Resources. It is in the wonderful position of not being able to pull the mineral out of the ground quick enough to satisfy demand.
But of course like all commodities, future demand will be key to its share price appreciation. Demand for lithium to be used in smart devices and electric cars is certainly high, but should it drop then all the lithium miners could take a big tumble.
