Orocobre Limited (ASX: ORE) and Galaxy Resources Limited (ASX: GXY) have agreed to a proposed $4b merger of equals that would create the fifth largest lithium chemicals company in the world.

The proposed merger will create a portfolio of assets across brine and hard rock in Canada, South America, Japan and Australia, with production capacity around 40,000tpa LCE (lithium carbonate equivalent), as well as vertical integration across the supply chain.

A new name for the merged is yet to be determined, with the group’s head office in Buenos Aires, Argentina, a corporate headquarters on the Australian east coast and an office in Perth.

Galaxy chairman Martin Rowley says the transaction has the potential to provide significant value for Galaxy and Orocobre shareholders.

“The merged entity’s growth opportunities in both brine and hard rock position it uniquely to take advantage of expected rising EV (electrical vehicle) demand for lithium,” he said.

Orocobre chief executive and managing director Martín Pérez de Solay, who will remain in his position for the group, says the proposed merger creates an opportunity to create a leading independent lithium company.

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“The merger consolidates the combined group’s position in Argentina and will give us significant operational, technical and financial flexibility to deliver the full value of our combined portfolio,” he said.

Galaxy chief executive Simon Hay says the transaction will allow the group to accelerate the development of its combined growth projects.

As part of the proposed merger, Mr Rowley will become Non-Executive Chairman, Orocobre chairman Robert Hubbard will become Deputy Chairman and Mr Hay will assume a newly created role as President of International Business.

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