Dynamic Metals Ltd (ASX:DYM) has soared after executing a binding joint venture and farm-in agreement with leading Australian lithium producer Mineral Resources Ltd (ASX:MIN) (MinRes) covering the Widgiemooltha Project in Western Australia and valued at up to $20 million.
The landmark agreement with a 100%-owned MinRes subsidiary will see Dynamic sell 40% of all lithium mineral rights on the Widgiemooltha tenement package, which is near the Bald Hill Lithium Mine of MinRes.
This will result in Dynamic receiving $5 million and forming a JV to advance lithium exploration on the project with Dynamic holding 60% and MinRes 40%.
Shares surge
Investors have responded decisively to the agreement with Dynamic shares as much as 93.8% higher in early ASX trading to $0.31.
In stage two of the agreement, MinRes can then sole fund $15 million of expenditure over four years to increase its stake in the JV to 65%.
At the completion of this stage, MinRes may elect to progress to stage three and increase its stake to 80% by sole funding expenditure through to a Decision to Mine.
“Pathway to production”
Dynamic Metals’ managing director Karen Wellman said: “The Widgiemooltha Project is a regionally significant tenement package that has yet to be fully assessed for its lithium potential.
“Although we have had some encouraging results with our first pass exploration activities, the sheer size of the project means that it would likely have taken Dynamic many years and considerable expenditure to assess its potential and realise value.
"We are excited by this transaction as MinRes is a leader in the lithium sector in Australia, with the technical expertise and financial capabilities to do the project justice.
“The nearby location of the Bald Hill mine, operated by MinRes, may offer a pathway to production for any discoveries on the Widgiemooltha Project.”
Only applies to lithium
On completion of the third stage Dynamic may contribute pro rata its proportion of JV costs going forward or convert its interest into a royalty.
Importantly, Dynamic will retain rights to all minerals other than lithium over the project and will maintain access to all areas of the project.
Upfront payment
Of the purchase price, $400,000 will be paid immediately as a signing fee and $3.6 million in cash on completion, with a deferred payment of $1 million on July 1, 2025.
"The initial consideration will be used to advance exploration of our pipeline of new projects, whilst lithium exploration at Widgiemooltha is expected to generate considerable newsflow, both short and medium term,” Wellman said.
"We look forward to working collaboratively with MinRes over the coming years to deliver value for our shareholders.”
The transaction, subject to the satisfaction of certain conditions precedent, is anticipated to complete in the second quarter of 2024.