Catalist-listed Alliance Mineral Assets and an Australian-listed firm have agreed to "a merger of equals" that will create a lithium producer valued at about A$446 million (S$450.8 million).
Under the deal, Alliance will acquire all the issued share capital of Tawana Resources at 1.10 Alliance share for each Tawana share.
Once the merger is complete, Tawana will become a wholly owned subsidiary of Alliance. Existing Alliance shareholders will own about 51 per cent of the merged entity, existing Tawana shareholders the rest.
The merger is expected to be completed by the fourth quarter.
Alliance and Tawana are equal partners in the Bald Hill project in Western Australia so the merged entity will own 100 per cent of this project, which is expected to start producing lithium concentrate this month.
Lithium is a sought-after metal for manufacturing long-life batteries that power up electric vehicles and consumer electronics devices.
Alliance said in a disclosure that the merger will simplify the ownership and operational management of the Bald Hill project. Its directors have unanimously recommended shareholders back the merger.
Alliance's substantial shareholder, Burwill Holdings, which holds 14.1 per cent of Alliance's issued share capital, has also entered into a binding agreement to vote in favour of the merger.
The planned merger has drawn support from Tawana directors, Alliance's shareholders holding about 20.4 per cent of the company, and Tawana's shareholders holding about 32.6 per cent of that firm.
Alliance and Tawana have lined up separate equity raising exercises on the back of the planned merger.
Alliance aims to raise gross proceeds of A$25 million from a fully underwritten placement to sophisticated and institutional investors.
It also plans to raise A$7.8 million in gross proceeds from a non-underwritten placement to Burwill.
Tawana has lined up a fully underwritten placement to raise A$20 million from professional investors.
It has also reserved the right to place up to a further A$5 million on a non-underwritten basis.
Proceeds from these placements will go to fund additional working capital needs and to enable continued production in the Bald Hill project.