MELBOURNE, May 3 (Reuters) – Wesfarmers Ltd’s bid for Australia’s Kidman Resources undervalues the lithium miner, analysts said on Friday, reflecting the financing difficulties the sector faces even as electric car makers warn of raw material shortages.
Wesfarmers offered a 47 percent premium for Kidman, which is developing the Mount Holland project in Western Australia through a joint venture with battery chemicals maker Sociedad Quimica y Minera de Chile S.A. (SQM).
But even that offer, which valued the company at A$776 million ($543 million) or A$1.90 per share, undervalued the company, said analysts at J.P. Morgan and Canaccord Genuity.
Prospects for lithium demand look strong over the next decade as governments worldwide set ambitious targets to increase electric vehicle sales.
In May 2018, Kidman signed a lithium supply agreement with electric carmaker Tesla, which this week forecasts a shortage of key electric vehicle minerals occurring in the future.
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