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Does Wesfarmers have its eyes on Australia’s lithium miners?

Earlier this week Wesfarmers Ltd (ASX: WES) reaffirmed its interest in enquiring rare earths producer Lynas Corporation Ltd (ASX: LYC).

Whilst a deal looks a touch unlikely at the current offer price of $2.25 cash per share, it might not be the end of the world if Wesfarmers can’t get things over the line.

Rumours are circulating that Wesfarmers might seek to gain exposure to the decarbonisation of the energy sector thematic through an investment in a lithium miner.

According to an AFR report, Wesfarmers is believed to have had its eyes on “about half a dozen lithium players”.

One asset that the conglomerate was believed to be interested in was the Wodgina Lithium Project stake which was sold by Mineral Resources Limited (ASX: MIN) at the end of last year. Wesfarmers is understood to have been outbid for the stake by lithium giant Albemarle.

This could mean that the company has turned its attention to the Pilgangoora Project owned by Pilbara Minerals Ltd (ASX: PLS).

Late last month Pilbara Minerals revealed that it was considering a range of potential transactions including the sale of a minority interest in the Western Australia-based project of between 20% and 49%.

Another potential option is the Mt Holland Project owned by Kidman Resources Ltd (ASX: KDR). The report suggests that Kidman’s lack of funds means it is seeking buyers for its gold and base metals assets.

One name not mentioned in the report is Galaxy Resources Limited (ASX: GXY). But with its shares trading close to a 52-week low and looking very cheap on a sum of the parts valuation, it could arguably be a great way for Wesfarmers to gain exposure to lithium. Especially given the world class assets it has in its portfolio.

But at this stage it is worth remembering that this is only speculation, so I would suggest investors resist the temptation to buy shares in the hope of a takeover approach.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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