Potential $42.5m deal with mining major Rio to fast-track Charger’s lithium drive

Charger Metals and Rio Tinto Exploration (RTX), have entered into a binding farm-in agreement
The agreement includes a potential $42.5m investment for RTX to earn a 75% stake in Lake Johnson project
Charger has also signed a binding agreement with Lithium Australia to purchase its 30% stake in Lake Johnston, increasing its interest to 100%

Special Report: Charger Metals has inked what could be a very lucrative farm-in agreement with Rio Tinto Exploration over its Lake Johnston lithium project.

Charger Metals’ (ASX:CHR) Lake Johnston project covers part of the Archaean-aged Lake Johnston greenstone belt where LCT pegmatite swarms have been mapped and sampled along a 50km corridor.

Previous drilling has highlighted the potential of the Medcalf prospect, with notable intersections such as 4m at 2.06% Li2O from 145m and 6m at 1.56% Li2O from 19m, allowing the explorer to delineate spodumene-bearing pegmatites up to 13m thick.

Other target areas include the Mt Gordon prospect and much of the Mount Day lithium-caesium-tantalum pegmatite field, which is prospective for lithium and tantalum minerals.

Lake Johnston in relation to other Yilgarn lithium projects. Pic via Charger Metals

The region hosting the project has emerged as a hotbed of lithium activity due to its proximity to the large Mount Holland lithium project under development by Covalent Lithium (a joint venture between subsidiaries of Sociedad Química y Minera de Chile S.A. and Wesfarmers) about 70km west of Lake Johnston.

Up until now, Lake Johnston’s ownership has been split 70:30 between Charger and Lithium Australia (ASX:LIT), but Rio Tinto Exploration (RTX) — a wholly owned subsidiary of Rio Tinto (ASX:RIO) — is now looking to grab a piece of the pie.

RTX binding farm-in agreement

CHR has entered into a binding farm-in agreement with RTX for its Lake Johnston lithium project in WA’s Yilgarn region.

RTX will pay the explorer $500,000 and invest $1.2m in the company prior to the commencement of the farm-in, which will see RTX spend a minimum $3m in exploration over the first 12 months.

RTX can then earn 51% by sole funding $10m in exploration expenditure and paying CHR a minimum of $1.5m in further cash payments.

Sole funding $40m in exploration expenditure or completing a definitive feasibility study (DFS) will see RTX earn 75% in Lake Johnson.

Up to $42.5m investment fast-tracks spodumene prospects

“This is an excellent result for Charger and its shareholders,” CHR managing director Aidan Platel says.

“It reaffirms our belief that the Lake Johnston project has potential to host a large-scale lithium deposit.

“The significant investment by RTX will allow thorough systematic exploration over all of the project tenure, with initial exploration focused on fast-tracking the Medcalf spodumene prospect as well as progressing the Mt Day and Mt Gordon lithium prospects.”

According to CHR chairman Adrian Griffin, the RTX farm-in agreement comprises a potential total investment of $42.5m for a 75% stake in the 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.”

Win-win outcome

Meanwhile, CHR has entered into a binding agreement with Lithium Australia (ASX:LIT) to purchase its 30% minority stake in Lake Johnston for $2m, increasing its interest to 100%.

The payment will be structured with a $0.15m non-refundable exclusivity payment paid within two business days of signing the acquisition agreement, and $1.85m on completion.

“We are excited by the opportunity to engage with Charger regarding the sale of Lithium Australia’s remaining holding in the Lake Johnston lithium project,” LIT CEO and managing director Simon Linge says.

“As a significant shareholder of Charger, we are also excited by the partnership between Rio Tinto and Charger and believe this provides a win-win outcome for all.”

Lithium Australia says it retains optionality to secure any future lithium offtake from successful resource development to support its battery materials business.

This article was developed in collaboration with Charger Metals, 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.