Junior graphite explorer Triton Minerals has decided not to go ahead with a deal to acquire a package of lithium assets in Western Australia from larger peer Westgold Resources.

The two companies inked an option agreement just before Christmas last year that included royalties over lithium production from the Mount Marion and Buldania projects and exploration licences north and west of Mount Marion.

But despite the potential for lithium, both companies agreed not to go ahead with the deal because a “satisfactory and timely completion appears unlikely”, Triton (ASX:TON) told investors.

The transaction was subject to a number of conditions including legal, technical and commercial due diligence, the execution of third party agreements, satisfaction of Westgold’s tax advice and approval from Triton shareholders.

Triton had until the end of February to exercise the option.

Triton shares were up 13 per cent at 9.6c in Wednesday lunchtime trade.

Triton shares over the past year.
Triton (ASX:TON) shares over the past year.

Due diligence showed that the assets had “quite a bit of prospectivity”,  managing director Peter Canterbury told Stockhead.

“But for Triton it would have required a lot more work to justify the price tag and that’s why there was a real timing issue in relation to that, as well there was flagged a potential negative tax impact for Westgold.”

Triton’s key focus is its Ancuabe graphite project in Mozambique, which it is aiming to have in operation by July 2019 following a short construction period starting in May this year.

The company is on the hunt for projects that could potentially deliver an early revenue stream without too much work on Triton’s part.

“We’ve got a very big year this year in terms of starting construction at Ancuabe and one of the views is that if we were doing that lithium deal with Westgold it wouldn’t require a lot of work initially,” Mr Canterbury said.

“It wouldn’t distract us, but one of the key parts of it is that if it had a royalty stream that we could be confident in the timing, it would assist also with some of the financing discussions. Our view is we should be looking for projects that could have diversification but that don’t need to be developed in the next 12 months.”

More gold for Westgold 

Meanwhile, S2 Resources (ASX:S2R) is selling three Western Australian gold projects to Westgold (ASX:WGX) for $9 million.

The company has inked a binding heads of agreement to offload its 100 per cent interest in the Polar Bear and Norcott projects and 80 per cent interest in the Eundynie joint venture.

S2 will retain the nickel, copper, cobalt and platinum group elements rights over the projects.

Westgold will settle the deal via a cash payment of $3 million and the issue of 4 million shares.

The sale is part of S2’s strategy to focus on its exploration projects in Scandinavia and Nevada.

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