Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

In a cyclical and volatile commodity sector, such as lithium, profitability is key during lean times.
Brisbane-based <a href="https://www.smartkarma.com/entities/orocobre-ltd" target="_blank" data-smartkarma-citation="entities:3572:1" rel="noopener">Orocobre Ltd (ORE AU)</a> and Perth-based <a href="https://www.smartkarma.com/entities/galaxy-resources-ltd" target="_blank" data-smartkarma-citation="entities:13914:1" rel="noopener">Galaxy Resources (GXY AU)</a> are in effect, the poster children for Aussie-listed lithium producers.  Orocobre extracts the commodity from Argentinian brine ponds, and Galaxy from Western Australian rock. Two different lithium products in two different jurisdictions.
Amid a downturn in the price of the battery commodity and a reduction in tonnes exported, both Galaxy and Orocobre splashed red ink in <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02205130-6A969035?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">FY19</a> (Dec-end) and <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02273544-2A1246100?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">FY20</a> (June-end) respectively.
The downturn resulted in <a href="https://www.smartkarma.com/entities/alita-resources-ltd" target="_blank" data-smartkarma-citation="entities:16331:1" rel="noopener">Alita Resources (AMS SP)</a> - in which Galaxy is a shareholder - going into administration, a situation that is still working its way through the <a href="https://www.miningweekly.com/article/galaxy-joins-the-fight-for-bald-hill-2021-02-12" target="_blank" rel="noopener">sale of asset process</a>. In addition, <a href="https://www.smartkarma.com/entities/pilbara-minerals-ltd" target="_blank" data-smartkarma-citation="entities:7460:1" rel="noopener">Pilbara Minerals (PLS AU)</a> acquired <a href="https://www.smartkarma.com/entities/altura-mining-ltd" target="_blank" data-smartkarma-citation="entities:13385:1" rel="noopener">Altura Mining (AJM AU)</a> late last year after the latter entered receivership in November as the raw battery materials market nose-dived.
A reversal of fortunes has seen increased demand, and price, for Galaxy's spodumene concentrate, and Orocobre's Argentinian lithium bicarbonate. In its quarterly update on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02362944-2A1292351?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">13 April</a>, Orocobre said pricing was up more than 50% since the Dec-20 quarter, and nearly 90% in the last six months. 
<h3>The NEW News</h3>
After circling each other for a couple of years, Galaxy and Orocobre entered into a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02364542-2A1293132?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">binding agreement</a> earlier this week under which the two companies will merge via a Galaxy Scheme, following which, Orocobre will hold 100% in Galaxy.
Galaxy shareholders will receive 0.569 Orocobre shares for each Galaxy share. Upon implementation, Orocobre shareholders will own 54.2% of the enlarged entity, and Galaxy shareholders will own the remaining 45.8%.
The A$4bn combined entity will be the fifth-largest lithium producer - and third-largest outside of China - boasting a diversified product base via four producing assets.
The two companies classify this as a merger of equals, and in many respects it is. Each company will appoint four directors to the new nine-person board, and the chairman and deputy chairman’s jobs for the coming 12 months will be split down the middle until replacements are found.
This is an intelligent merger. Not only does it establish a foothold in South American brines and Western Australian/North American spodumene, something the world’s largest lithium producers seek to achieve, the new entity will be better positioned to weather a material correction in lithium prices.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/201/665/original/image_29076439221618885833728.png?1618885835" class="editor-image img-responsive" data-smartkarma-image-id="201665"></figure>

In a cyclical and volatile commodity sector, such as lithium, profitability is key during lean times.
Brisbane-based Orocobre Ltd (ORE AU) and Perth-based Galaxy Resources (GXY AU) are in effect, the poster children for Aussie-listed lithium producers.  Orocobre extracts the commodity from Argentinian brine ponds, and Galaxy from Western Australian rock. Two different lithium products in two different jurisdictions.
Amid a downturn in the price of the battery commodity and a reduction in tonnes exported, both Galaxy and Orocobre splashed red ink in FY19 (Dec-end) and FY20 (June-end) respectively.
The downturn resulted in Alita Resources (AMS SP) - in which Galaxy is a shareholder - going into administration, a situation that is still working its way through the sale of asset process. In addition, Pilbara Minerals (PLS AU) acquired Altura Mining (AJM AU) late last year after the latter entered receivership in November as the raw battery materials market nose-dived.
A reversal of fortunes has seen increased demand, and price, for Galaxy's spodumene concentrate, and Orocobre's Argentinian lithium bicarbonate. In its quarterly update on the 13 April, Orocobre said pricing was up more than 50% since the Dec-20 quarter, and nearly 90% in the last six months. 
The NEW News
After circling each other for a couple of years, Galaxy and Orocobre entered into a binding agreement earlier this week under which the two companies will merge via a Galaxy Scheme, following which, Orocobre will hold 100% in Galaxy.
Galaxy shareholders will receive 0.569 Orocobre shares for each Galaxy share. Upon implementation, Orocobre shareholders will own 54.2% of the enlarged entity, and Galaxy shareholders will own the remaining 45.8%.
The A$4bn combined entity will be the fifth-largest lithium producer - and third-largest outside of China - boasting a diversified product base via four producing assets.
The two companies classify this as a merger of equals, and in many respects it is. Each company will appoint four directors to the new nine-person board, and the chairman and deputy chairman’s jobs for the coming 12 months will be split down the middle until replacements are found.
This is an intelligent merger. Not only does it establish a foothold in South American brines and Western Australian/North American spodumene, something the world’s largest lithium producers seek to achieve, the new entity will be better positioned to weather a material correction in lithium prices.


Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Post market close today, S&amp;P Dow Jones Indices has announced the list of changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the March index review that will be effective after the close of trading on 19 March.There are 6 inclusions and 6 exclusions in this review. This is more than what we expected - we had 3 adds and 3 deletes, and another 2 potential adds and 2 potential deletes.The inclusions are <a href="https://www.smartkarma.com/entities/codan-ltd-australia" target="_blank" data-smartkarma-citation="entities:6189:1" rel="noopener">Codan Ltd (CDA AU)</a>, <a href="https://www.smartkarma.com/entities/champion-iron-ltd" target="_blank" data-smartkarma-citation="entities:19734:1" rel="noopener">Champion Iron (CIA AU)</a>, <a href="https://www.smartkarma.com/entities/hub24-ltd" target="_blank" data-smartkarma-citation="entities:12336:1" rel="noopener">Hub24 Ltd (HUB AU)</a>, <a href="https://www.smartkarma.com/entities/nickel-mines-ltd" target="_blank" data-smartkarma-citation="entities:30639:1" rel="noopener">Nickel Mines Ltd (NIC AU)</a>, <a href="https://www.smartkarma.com/entities/nuix-limited" target="_blank" data-smartkarma-citation="entities:31040:1" rel="noopener">Nuix Limited (NXL AU)</a> and <a href="https://www.smartkarma.com/entities/pilbara-minerals-ltd" target="_blank" data-smartkarma-citation="entities:7460:1" rel="noopener">Pilbara Minerals (PLS AU)</a>. The exclusions are <a href="https://www.smartkarma.com/entities/bravura-solutions-ltd" target="_blank" data-smartkarma-citation="entities:23648:1" rel="noopener">Bravura Solutions (BVS AU)</a>, <a href="https://www.smartkarma.com/entities/gwa-group-ltd" target="_blank" data-smartkarma-citation="entities:663:1" rel="noopener">Gwa Group Ltd (GWA AU)</a>, <a href="https://www.smartkarma.com/entities/sandfire-resources-nl" target="_blank" data-smartkarma-citation="entities:1259:1" rel="noopener">Sandfire Resources Nl (SFR AU)</a>, <a href="https://www.smartkarma.com/entities/smartgroup-corp-ltd" target="_blank" data-smartkarma-citation="entities:19954:1" rel="noopener">Smartgroup Corp (SIQ AU)</a>, <a href="https://www.smartkarma.com/entities/service-stream-ltd" target="_blank" data-smartkarma-citation="entities:18493:1" rel="noopener">Service Stream (SSM AU)</a> and <a href="https://www.smartkarma.com/entities/tassal-group-ltd" target="_blank" data-smartkarma-citation="entities:16234:1" rel="noopener">Tassal (TGR AU)</a>.Given there are only 5 trading days from now to implementation, there are significant days to trade on quite a lot of the stocks.

Post market close today, S&amp;P Dow Jones Indices has announced the list of changes to the S&amp;P/ASX 200 (AS51 INDEX) as part of the March index review that will be effective after the close of trading on 19 March.There are 6 inclusions and 6 exclusions in this review. This is more than what we expected - we had 3 adds and 3 deletes, and another 2 potential adds and 2 potential deletes.The inclusions are Codan Ltd (CDA AU), Champion Iron (CIA AU), Hub24 Ltd (HUB AU), Nickel Mines Ltd (NIC AU), Nuix Limited (NXL AU) and Pilbara Minerals (PLS AU). The exclusions are Bravura Solutions (BVS AU), Gwa Group Ltd (GWA AU), Sandfire Resources Nl (SFR AU), Smartgroup Corp (SIQ AU), Service Stream (SSM AU) and Tassal (TGR AU).Given there are only 5 trading days from now to implementation, there are significant days to trade on quite a lot of the stocks.

ASX200 Index Rebalance: More Change Than Expected

<div>S&amp;P Dow Jones Indices will announce changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the March index review on 12 March and the changes will be effective after the close of trading on 19 March.</div><div>
The data cutoff for the March review was 26 February.
We see <a href="https://www.smartkarma.com/entities/nuix-limited" target="_blank" data-smartkarma-citation="entities:31040:1" rel="noopener">Nuix Limited (NXL AU)</a>, <a href="https://www.smartkarma.com/entities/codan-ltd-australia" target="_blank" data-smartkarma-citation="entities:6189:1" rel="noopener">Codan Ltd (CDA AU)</a> and <a href="https://www.smartkarma.com/entities/pilbara-minerals-ltd" target="_blank" data-smartkarma-citation="entities:7460:1" rel="noopener">Pilbara Minerals (PLS AU)</a> as potential inclusions to the index, while we see <a href="https://www.smartkarma.com/entities/service-stream-ltd" target="_blank" data-smartkarma-citation="entities:18493:1" rel="noopener">Service Stream (SSM AU)</a>, <a href="https://www.smartkarma.com/entities/tassal-group-ltd" target="_blank" data-smartkarma-citation="entities:16234:1" rel="noopener">Tassal (TGR AU)</a> and <a href="https://www.smartkarma.com/entities/bravura-solutions-ltd" target="_blank" data-smartkarma-citation="entities:23648:1" rel="noopener">Bravura Solutions (BVS AU)</a> as potential exclusions from the index.
<a href="https://www.smartkarma.com/entities/champion-iron-ltd" target="_blank" data-smartkarma-citation="entities:19734:1" rel="noopener">Champion Iron (CIA AU)</a> and <a href="https://www.smartkarma.com/entities/de-grey-mining-ltd" target="_blank" data-smartkarma-citation="entities:6192:1" rel="noopener">De Grey Mining (DEG AU)</a> are close adds while <a href="https://www.smartkarma.com/entities/gwa-group-ltd" target="_blank" data-smartkarma-citation="entities:663:1" rel="noopener">Gwa Group Ltd (GWA AU)</a> and <a href="https://www.smartkarma.com/entities/smartgroup-corp-ltd" target="_blank" data-smartkarma-citation="entities:19954:1" rel="noopener">Smartgroup Corp (SIQ AU)</a> are close deletes.
Short interest on the potential inclusions has been decreasing and is currently near the lows while short interest on the potential deletions has been steadily increasing and is at the highs.
Since the last index review in December, <a href="https://www.smartkarma.com/entities/pointsbet-holdings-pty-ltd" target="_blank" data-smartkarma-citation="entities:29102:1" rel="noopener">PointsBet Holdings Pty Ltd (PBH AU)</a> was included in the index replacing <a href="https://www.smartkarma.com/entities/saracen-mineral-holdings-limited" target="_blank" data-smartkarma-citation="entities:2415:1" rel="noopener">Saracen Mineral Holdings (SAR AU)</a> following its merger of equals with <a href="https://www.smartkarma.com/entities/northern-star-resources-ltd" target="_blank" data-smartkarma-citation="entities:4243:1" rel="noopener">Northern Star Resources (NST AU)</a>.
</div>

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 200 (AS51 INDEX) as part of the March index review on 12 March and the changes will be effective after the close of trading on 19 March.
The data cutoff for the March review was 26 February.
We see Nuix Limited (NXL AU), Codan Ltd (CDA AU) and Pilbara Minerals (PLS AU) as potential inclusions to the index, while we see Service Stream (SSM AU), Tassal (TGR AU) and Bravura Solutions (BVS AU) as potential exclusions from the index.
Champion Iron (CIA AU) and De Grey Mining (DEG AU) are close adds while Gwa Group Ltd (GWA AU) and Smartgroup Corp (SIQ AU) are close deletes.
Short interest on the potential inclusions has been decreasing and is currently near the lows while short interest on the potential deletions has been steadily increasing and is at the highs.
Since the last index review in December, PointsBet Holdings Pty Ltd (PBH AU) was included in the index replacing Saracen Mineral Holdings (SAR AU) following its merger of equals with Northern Star Resources (NST AU).


ASX200 Index Rebalance Preview: Three Potential Changes & Some Close Names

Northern Star Resources / Index Rebalance

Following the merger of equals between <a href="https://www.smartkarma.com/entities/northern-star-resources-ltd" target="_blank" data-smartkarma-citation="entities:4243:1" rel="noopener">Northern Star Resources (NST AU)</a> and <a href="https://www.smartkarma.com/entities/saracen-mineral-holdings-limited" target="_blank" data-smartkarma-citation="entities:2415:1" rel="noopener">Saracen Mineral Holdings (SAR AU)</a>, Saracen's last trading day will be 3 February.The various index providers will all delete <a href="https://www.smartkarma.com/entities/saracen-mineral-holdings-limited" target="_blank" data-smartkarma-citation="entities:2415:1" rel="noopener">Saracen Mineral Holdings (SAR AU)</a> at the close of trading on 3 February and increase the number of shares and investability weight for <a href="https://www.smartkarma.com/entities/northern-star-resources-ltd" target="_blank" data-smartkarma-citation="entities:4243:1" rel="noopener">Northern Star Resources (NST AU)</a>. This will result in passive selling on <a href="https://www.smartkarma.com/entities/saracen-mineral-holdings-limited" target="_blank" data-smartkarma-citation="entities:2415:1" rel="noopener">Saracen Mineral Holdings (SAR AU)</a> and passive buying on <a href="https://www.smartkarma.com/entities/northern-star-resources-ltd" target="_blank" data-smartkarma-citation="entities:4243:1" rel="noopener">Northern Star Resources (NST AU)</a>.<a href="https://www.smartkarma.com/entities/saracen-mineral-holdings-limited" target="_blank" data-smartkarma-citation="entities:2415:1" rel="noopener">Saracen Mineral Holdings (SAR AU)</a>'s deletion from the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> will create a vacancy that will be filled by <a href="https://www.smartkarma.com/entities/pointsbet-holdings-pty-ltd" target="_blank" data-smartkarma-citation="entities:29102:1" rel="noopener">PointsBet Holdings Pty Ltd (PBH AU)</a>.<a href="https://www.smartkarma.com/entities/pointsbet-holdings-pty-ltd" target="_blank" data-smartkarma-citation="entities:29102:1" rel="noopener">PointsBet Holdings Pty Ltd (PBH AU)</a>'s inclusion in the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> and <a href="https://www.smartkarma.com/entities/saracen-mineral-holdings-limited" target="_blank" data-smartkarma-citation="entities:2415:1" rel="noopener">Saracen Mineral Holdings (SAR AU)</a>'s deletion will also lead to changes in the names that are expected to be included in/excluded from the index at the March review.

Following the merger of equals between Northern Star Resources (NST AU) and Saracen Mineral Holdings (SAR AU), Saracen's last trading day will be 3 February.The various index providers will all delete Saracen Mineral Holdings (SAR AU) at the close of trading on 3 February and increase the number of shares and investability weight for Northern Star Resources (NST AU). This will result in passive selling on Saracen Mineral Holdings (SAR AU) and passive buying on Northern Star Resources (NST AU).Saracen Mineral Holdings (SAR AU)'s deletion from the S&amp;P/ASX 200 (AS51 INDEX) will create a vacancy that will be filled by PointsBet Holdings Pty Ltd (PBH AU).PointsBet Holdings Pty Ltd (PBH AU)'s inclusion in the S&amp;P/ASX 200 (AS51 INDEX) and Saracen Mineral Holdings (SAR AU)'s deletion will also lead to changes in the names that are expected to be included in/excluded from the index at the March review.

S&amp;P Dow Jones Indices will announce changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the March index review on 12 March and the changes will be effective after the close of trading on 19 March.The data cutoff for the March review is 26 February.Using market data to the close of trading on 15 January, we expect <a href="https://www.smartkarma.com/entities/pointsbet-holdings-pty-ltd" target="_blank" data-smartkarma-citation="entities:29102:1" rel="noopener">PointsBet Holdings Pty Ltd (PBH AU)</a>, <a href="https://www.smartkarma.com/entities/de-grey-mining-ltd" target="_blank" data-smartkarma-citation="entities:6192:1" rel="noopener">De Grey Mining (DEG AU)</a> and <a href="https://www.smartkarma.com/entities/codan-ltd-australia" target="_blank" data-smartkarma-citation="entities:6189:1" rel="noopener">Codan Ltd (CDA AU)</a> to be added to the index, replacing <a href="https://www.smartkarma.com/entities/service-stream-ltd" target="_blank" data-smartkarma-citation="entities:18493:1" rel="noopener">Service Stream (SSM AU)</a>, <a href="https://www.smartkarma.com/entities/tassal-group-ltd" target="_blank" data-smartkarma-citation="entities:16234:1" rel="noopener">Tassal (TGR AU)</a> and <a href="https://www.smartkarma.com/entities/gwa-group-ltd" target="_blank" data-smartkarma-citation="entities:663:1" rel="noopener">Gwa Group Ltd (GWA AU)</a>.<a href="https://www.smartkarma.com/entities/pilbara-minerals-ltd" target="_blank" data-smartkarma-citation="entities:7460:1" rel="noopener">Pilbara Minerals (PLS AU)</a> and <a href="https://www.smartkarma.com/entities/champion-iron-ltd" target="_blank" data-smartkarma-citation="entities:19734:1" rel="noopener">Champion Iron (CIA AU)</a> are close adds while <a href="https://www.smartkarma.com/entities/bravura-solutions-ltd" target="_blank" data-smartkarma-citation="entities:23648:1" rel="noopener">Bravura Solutions (BVS AU)</a> and <a href="https://www.smartkarma.com/entities/smartgroup-corp-ltd" target="_blank" data-smartkarma-citation="entities:19954:1" rel="noopener">Smartgroup Corp (SIQ AU)</a> are close deletes.

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 200 (AS51 INDEX) as part of the March index review on 12 March and the changes will be effective after the close of trading on 19 March.The data cutoff for the March review is 26 February.Using market data to the close of trading on 15 January, we expect PointsBet Holdings Pty Ltd (PBH AU), De Grey Mining (DEG AU) and Codan Ltd (CDA AU) to be added to the index, replacing Service Stream (SSM AU), Tassal (TGR AU) and Gwa Group Ltd (GWA AU).Pilbara Minerals (PLS AU) and Champion Iron (CIA AU) are close adds while Bravura Solutions (BVS AU) and Smartgroup Corp (SIQ AU) are close deletes.

ASX200 Index Rebalance Preview: Three Potential Changes for Now; Could Increase to Five

Australia

Pilbara Minerals Ltd. is a mineral exploration company. The Company owns mineral tenements in the west Pilbara region of Western Australia where it explores for iron ore, gold and base metals, particularly copper and nickel.

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Pilbara Minerals (PLS AU)

Orocobre/Galaxy Resources: On A Charge

The merged entity will capture a greater market share of the lithium supply in coming years, and capitalise on mining synergies. Plus afford the...

David Blennerhassett

ASX200 Index Rebalance: More Change Than Expected

There are 6 inclusions and 6 exclusions for the ASX200 at the March review. There are a few 'surprises' and there is quite a lot of short interest...

Brian Freitas

ASX200 Index Rebalance Preview: Three Potential Changes & Some Close Names

We see three potential changes to the ASX200 in the March review while there are another two close adds/deletes. High short interest on the...

Brian Freitas

Saracen/Northern Star Merger: Index Flow

Saracen Minerals will be deleted from all indices at the close on 3 February following its merger with Northern Star. There could be a lot of flow...

Brian Freitas

ASX200 Index Rebalance Preview: Three Potential Changes for Now; Could Increase to Five

There could be up to 5 changes at the next ASX200 rebalance in March. The expected adds have outperformed the deletes significantly and are trading...

Brian Freitas

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