Lithium Energy Ltd (ASX:LEL) will boost its battery minerals war chest by up to US$63 million (~A$97 million) after agreeing to sell its 90% interest in the Solaroz Lithium Brine Project in Argentina.
The company has entered into a binding Share Sale Agreement with CNGR Netherlands New Energy Technology B.V., a subsidiary of CNGR Advanced Material Co Ltd, for the sale of the Solaroz stake.
This sale price, excluding costs and taxes, is equivalent to A$0.865 per Lithium Energy share, which is a 79% premium to the company’s three-month VWAP and a 52% premium to its one-month VWAP.
It also reflects the substantial value created by the company at Solaroz since its IPO in May 2021 at $0.20 per share.
Sale reflects value created
Executive chairman William Johnson said: "The proposed sale follows the conclusion of a formal process initiated by the company to seek a strategic partner for the development of Solaroz.
"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.
"The US$63 million (or A$97 million based on current exchange rates) purchase price reflects the significant value that the company has created at the Solaroz Project since Lithium Energy was listed on ASX in May 2021.
"The transaction will remove the company’s funding and development risks associated with the project while delivering the company a very substantial cash balance.
"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."
Sale terms
CNGR, one of the world’s largest producers of precursor materials for leading companies in the battery materials supply chain, will pay a US$1.8 million (~A$2.8 million) deposit with the balance of the US$61.2 million (~A$94.1 million) consideration payable as follows:
- US$53.7 million (~A$82.6 million), payable at completion;
- US$3 million (~A$4.6 million) to be transferred to a joint escrow account held for the benefit of both Lithium Energy and CNGR for a period of two years from the date of completion, to serve as security for Lithium Energy 's performance under the agreement, after which it will be released to Lithium Energy; and
- US$4.5 million (~A$6.9 million) deferred consideration payable by CNGR if the Benchmark Lithium Carbonate Price exceeds US$23,000/tonne (averaged over any four-month period in the 12 months after completion.
The sale of the Solaroz Project will be effected through the sale of the whole of Lithium Energy’s 90% shareholding in Argentinian company, Solaroz S.A., which owns the Solaroz Project mineral concessions, and the assignment of a loan owed by Solaroz to Lithium Energy.
This sale is subject to a number of conditions precedent including receipt of Lithium Energy shareholder approval and receipt of regulatory approvals (in China and Argentina, as required) to be satisfied within six months of the agreement.
Completion of the proposed transaction is targeted to occur in quarter four of 2024.
Subject to completion of the sale of Solaroz and completion of the proposed spin-out and IPO of Axon Graphite Limited as announced on April 3, 2024, the company will consider new investments in the battery minerals sector and/or a distribution of capital to shareholders.