Guess which ASX lithium share is sinking 17% on takeover disappointment

This lithium developer has received an approach. What is it worth to shareholders?

| More on:
A man sitting at a computer is blown away by what he's seeing on the screen, hair and tie whooshing back as he screams argh in panic.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Galan Lithium Ltd (ASX: GLN) share price is catching the eye on Tuesday.

In morning trade, the ASX lithium share is down 17% to 12.5 cents.

Why is this ASX lithium share sinking?

Investors have been selling the lithium developer's shares this morning after it released an update on takeover speculation.

In response to media speculation, Galan Lithium revealed that it has not received a takeover bid but has received an unsolicited, confidential, conditional, non-binding indicative proposal from Energy Exploration Technologies, Inc. (EnergyX) in relation to a potential acquisition of its Argentinian lithium assets.

According to the release, EnergyX's proposal is to acquire assets and real property held by Galan related to its holdings in Salar del Hombre Muerto and Candelas for US$50 million in cash and US$50 million in EnergyX shares.

It would also receive a 10% gross revenue royalty for 10 years starting from commercial production.

General Motors (NYSE: GM) and a consortium led by South Korean conglomerate Posco Holdings are investors in EnergyX.

What is Galan Lithium?

Galan Lithium's flagship assets are lithium brine projects, Hombre Muerto West (HMW) and Candelas. These are located on the Hombre Muerto Salar in Argentina, within South America's lithium triangle.

Hombre Muerto is known to host lithium brine deposition of the highest grade and lowest impurity levels within Argentina. It is home to the established El Fenix and Sal de Vida lithium operations owned by Arcadium Lithium (ASX: LTM) and the Sal de Oro project owned by POSCO.

Galan Lithium is also exploring at Greenbushes South in Western Australia, just south of the tier one Greenbushes Lithium Mine.

Offer response

Galan Lithium has not made a decision on the proposal at this point and warned there's no certainty that it will lead to anything concrete. It commented:

The Proposal is conditional on, amongst other things, completion of satisfactory due diligence and negotiation and execution of definitive, binding transaction documentation. The Proposal remains subject to consideration by Galan's board, and given the early stage nature of discussions and its conditionality, there is no certainty a transaction will eventuate. Given the Proposal contemplates the disposition of Galan's main undertaking, Galan shareholder approval would be a necessary condition to completion under a binding agreement, if such an agreement were to eventuate.

Motley Fool contributor James Mickleboro owns Arcadium Lithium shares. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended General Motors and has recommended the following options: long January 2025 $25 calls on General Motors. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

A group of miners in hard hats sitting in a mine chatting on a break as ASX coal shares perform well today
Materials Shares

Down but not out: Can these ASX mining shares bounce back?

Here’s what one broker is predicting for Australia’s largest mining companies. 

Read more »

Broker analysing the share price.
Materials Shares

Buy, hold, or sell? Broker's verdict on 3 ASX 200 materials shares

Materials was one of four market sectors that weakened in overall value in FY25.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Materials Shares

Why is this ASX mining stock crashing 14% today?

Let's see what is causing investors to hit the sell button on Monday.

Read more »

Three miners stand together at a mine site studying documents with equipment in the background
Materials Shares

$10,000 invested in BHP shares in FY25 is now worth

Did the Big Australian outperform or underperform during the last financial year?

Read more »

A male investor sits at his desk pondering at his laptop screen with a piece of paper in his hand.
Share Market News

Why did Macquarie just downgrade Liontown resources shares?

Here’s what the broker had to say about this materials company. 

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Materials Shares

Why did Macquarie downgrade Mineral Resources shares?

The broker is no longer bullish on this mining and mining services company.

Read more »

A bricklayer peers over the top of a brick wall he is laying with a level measuring tool on top and looks critically at the work he is carrying out.
Materials Shares

Brickworks shares rise 1% on trading update

Investors seem delighted by a new update from Brickworks.

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Materials Shares

Does Macquarie prefer Rio or BHP shares today?

Let's find out which mining giant is the better pick right now according to the broker.

Read more »