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Wesfarmers bets big on a rising lithium price as Kidman Resources deal is approved

The Wesfarmers Limited (ASX: WES) share price is marginally lower at $39.48 on Thursday lunchtime despite the investment conglomerate announcing that the federal court has approved its deal to acquire Kidman Resources Ltd (ASX: KDR)

On September 5 2019 nearly 95 per cent of Kidman’s shareholders voted to approve the $1.90 per share cash takeover bid, with the stock changing hands at $1.90 on the exchange this afternoon.

Buying Kidman Resources for around $776 million looks a speculative play for Wesfarmers given it posted no sales for the quarter ending June 30, 2019 and an operating cash loss of $2.33 million. It had around $25.6 million cash on hand as at quarter end. 

Like many others, it seems Wesfarmers is attracted to lithium miners due to the expected long term take up of electric vehicles.

Lithium is an essential material for the batteries required to power these vehicles and as such some experts are forecasting rising lithium prices. 

Recently, Wesfamers also had a bid knocked back for rare earths miner Lynas Corporation Ltd (ASX: LYC)

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of and has recommended 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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