The Azure Minerals Ltd (ASX: AZS) share price has returned from its trading halt with a bang.
In morning trade, the lithium explorer's shares are up a massive 37% to 31 cents.
Image source: Getty Images
Why is this lithium share rocketing higher?
Investors have been scrambling to buy Azure Minerals shares on Wednesday after lithium miner Sociedad Química y Minera de Chile (SQM) agreed to acquire a 19.99% stake in the company.
According to the release, the US$21 billion NYSE listed lithium giant will make a major cornerstone investment of up to $20 million at a price of 25.64 cents per share. This represents a 13.9% premium to the Azure Minerals share price prior to the trading halt.
Management believes SQM's cornerstone investment in Azure is a strong endorsement of the significant lithium potential of the Andover Project. This Western Australia-based project is co-owned by Azure (60%) and the Creasy Group (40%).
As part of the deal, SQM will enter into an offtake agreement for 25% of all lithium product in which Azure has an interest. This agreement is on arm's length and commercially competitive terms.
'A significant milestone event'
Azure's managing director, Tony Rovira, was very pleased with the news. He said:
We're very pleased to welcome SQM as a substantial and strategic investor in Azure, which demonstrates their strong interest and belief in the lithium potential of the Andover Project. This is a significant milestone event and is a strong endorsement of Azure and our projects by one of the world's leading lithium producers.
Rovira also highlights that the agreement will allow Azure to draw upon SQM's vast experience. He adds:
The new relationship will allow Azure to draw upon SQM's technical expertise in pegmatite-hosted lithium exploration, project development, production and marketing, providing Azure with strong support as we look to develop the Andover lithium assets.
Azure is now in a very strong financial position and, following completion of both tranches of the transaction with SQM, Azure will have a cash balance of more than $25 million which will be used to accelerate lithium exploration through a program of intensive drilling across the Andover Project.
Merger and acquisitions (M&A) activity certainly is heating up in the lithium space. Earlier this week another lithium explorer received an offer from a larger player.
