- Deal reached to sell Solaroz lithium brine project for $97m
- Sale represents a 52% premium to Lithium Energy’s one month VWAP
- Company to consider investment opportunities in the battery minerals area following sale of Solaroz and spin-off of Burke
Special Report: Lithium Energy’s belief in the prospectivity of its Solaroz lithium brine project in Argentina has been validated with its sale to CNGR Advanced Material for $97m.
The sale price is equivalent to 86.5c per LEL shares, representing a 52% premium to the company’s one month volume weighted average price, reflecting the value that it has created since the Company’s IPO in May 2021 at 20c per share.
Solaroz is on the Olaroz salar in NW Argentina and hosts a resource of 3.3Mt LCE resource with a high-grade core of 1.3Mt of LCE grading 400mg/l lithium.
This core underpins Lithium Energy’s (ASX:LEL) scoping study for both 20ktpa and 40ktpa LCE production from Solaroz using conventional evaporation ponds processing.
The same study also indicates that direct lithium extraction (DLE) techniques can potentially provide better recoveries and a more cost-effective operation – a theory that has received support from recent laboratory test work.
Laboratory work undertaken by Xi’an Lanshen New Material Technology Co successfully achieved resin recovery of 92% lithium from Solaroz brine – a clear indicator that DLE is a viable alternative to evaporation ponds.
Early in April 2024, LEL also reached an agreement with Novonix to spin out their Queensland graphite projects – Burke and Dromedary respectively – into an ASX listed company, Axon Graphite that will look to become a vertically integrated mine to battery anode material manufacturing company.
Sale highlights value creation
The sale of the company’s 90% interest in Solaroz to CNGR Advanced Material – one of the world’s largest producers of precursor materials for the battery materials supply chain – for $97m is a strong endorsement of Lithium Energy’s management team to create significant value for shareholders in a challenging market conditions.
The sale was made in what the Company believes to be in the best interests of shareholders given the significant decline in lithium prices over the last 12 months, the significant financial costs required to advance Solaroz into production relative to LEL’s available capital, the company’s ability to raise project finance, and the time required for its development.
CNGR will pay a US$1.8m deposit with the remaining US$61.2m paid out under the following conditions:
- US$53.7m on completion which is expected in Q4 2024 and subject to shareholder and regulatory approval;
- US$3m in a joint escrow account for two years from completion as security for LEL’s performance under the agreement; and
- US$4.5m deferred consideration payable by CNGR if the Benchmark Lithium Carbonate Price exceeds US$23,000/tonne.
“The proposed sale follows the conclusion of a formal process initiated by the company to seek a strategic partner for the development of Solaroz,” executive chairman William Johnson said.
“At the end of this process, taking account the multiple offers received and current market conditions, the board has determined that it is in the best interest of shareholders to consider the sale of the company’s interest in the Solaroz Project to CNGR on the terms proposed.”
He noted that not only did the sale price reflect the significant value that LEL has created at Solaroz since the company was listed in May 2021, it will also remove the funding and development risks associated with the project.
“Post completion, the company will have the capital required to consider investment opportunities in the battery minerals area. The board will also give consideration to a potential distribution to shareholders,” Johnson concluded.
This article was developed in collaboration with Lithium Energy, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.