Lithium Australia (ASX:LIT) have announced it has entered into a binding agreement with Charger Metals NL (ASX:CHR) for the $2 million sale of its remaining 30 percent holding in the Lake Johnston Lithium Project, demonstrating Lithium Australia’s continued focus on its core operations, whilst significantly bolstering its balance sheet.
Figure 1: Location of the Lake Johnston Lithium Project which was first successfully drilled for lithium in December 2022
The Terms of the Acquisition
The terms of the binding agreement outline Lithium Australia will sell its remaining 30 percent interest in the Lake Johnston Lithium Project, located in Yilgarn of Western Australia, and the contractual rights to the lithium in the tenements.
An upfront and non-refundable amount of $150,000 will be paid by Charger within two days of signing the agreement, with the remaining $1.85 million to be paid on completion.
Completion is anticipated to occur before the 28th of February next year.
Lithium Australia – Turning Attention Elsewhere
The divestment of the Lake Johnston Project enables Lithium Australia to focus on its core operations of lithium chemicals, battery materials, and battery recycling.
The cash proceeds of the transaction additionally strengthen the Company’s balance sheet, placing it in an advantageous position to meet its growth objectives and reflect its ongoing commitment to decarbonise lithium production.
In August, the Company announced it had entered into a massive joint development agreement with Australian mining giant MinRes (ASX: MIN), to develop a $4.5 million pilot plant using Lithium Australia’s patented LieNA® lithium extraction technology.
Figure 2: Lithium Australia’s patented extraction technology offers competitive advantage for miners. Graphic: Lithium Australia’s Investor Presentation.
The patented technology allows for the recovery of lithium from fine and low-grade spodumene, typically disposed of as waste streams, allowing for improved mining efficiency, sustainability and potential profitability.
This milestone agreement earmarked Lithium Australia’s transition away from lithium exploration and toward lithium-ion battery development, with the Company moving to divest a number of its exploration projects like Lepidolite Hill and GreenBushes, whilst commercialising its Envirostream and VSPC subsidiaries.
Selling its remaining interest in the Lake Johnston Project is further evidence of this shift, and its commitment to devolving its core operations.
Charger Charging Ahead
Whilst increasing it’s ownership in the Lake Johnston Lithium Project to 100 percent, Charger simultaneously entered into a farm-in agreement with Rio Tinto Exploration Pty Ltd (RTX), a subsidiary of mining giant Rio Tinto Limited (ASX:RIO).
The Farm-In agreement consists of the following terms:
- A preliminarily payment of $500,000 from RTX to Charger and the investment of $1.2 million in Charger prior to the commencement of the agreement
- RTX to spend a minimum $3 million exploration expenditure over the first 12 months
- RTX can earn up to 51 percent by sole funding $10 million in exploration expenditure and paying Charger minimum further cash payments of $1.5 million
- RTX can earn 75 percent by sole funding $40 million in exploration expenditure or completing a Definitive Feasibility Study
The agreement with Rio Tinto demonstrates the prospectivity of the Lake Johnston Lithium Project and its potential to host a large-scale lithium deposit.
On the back of TG Metals recent success in the area, recording intersections of high grade lithium mineralisation up to 2.28% Li2O, the Lake Johnston Project is strategically located to tap into undiscovered lithium anomalism.
Charger’s Chairman Adrian Griffin said the Rio Tinto Exploration farm-in agreement could see RTX investing $42.5 million and earning up to a 75 percent interest in the Lake Johnston Project.
“The largely unexplored Lake Johnston Greenstone belt now hosts multiple spodumene discoveries and with the recent focus and increasing exploration activity could evolve into a prominent lithium province,” he said.
Lithium Australia Company Comments
Lithium Australia’s CEO and Managing Director, Simon Linge, commented on the transaction.
“We are excited by the opportunity to engage with Charger Metals regarding the sale of Lithium Australia’s remaining holding in the Lake Johnston Lithium Project,” he said.
“As a significant shareholder of Charger, we are excited by the partnership between Rio Tinto Limited and Charger and believe this provides a win-win outcome for all.”
“The transaction reaffirms our commitment to focusing on our core operations, while aligning the Company to its ESG ambitions. Lithium Australia also retains optionality to secure any future lithium offtake from successful resource development to support our battery materials business. I am excited by our future prospects and believe this transaction will help us to lead and enable the global transition to sustainable electrification.”
LIT’s Australian Stock Exchange-listed share price is currently trading at $0.033 (11:00am UTC+ 8 hours).