Prospect Resources improves lithium offtake deal

Published at Apr 4, 2018, in Mining

This product is classified as ‘very high risk’ in nature due to its location and geopolitical situation of the region. Finfeed advises that extra caution should be taken when deciding whether to engage in this product, however if you are not sure whether it is suitable for you we suggest you seek independent financial advice.

Prospect Resources Ltd (ASX:PSC) today announced that it has completed a share placement to Sinomine Resources, following shareholder approval. PSC received A$10,000,000 from Sinomine for 166,666,667 PSC shares at 6c per share — a premium to the original placing price of 5c per share.

PSC also announced that it has favourably renegotiated terms of a conditional offtake agreement between its Zimbabwean subsidiary, Examix Investments Limited and Sinomine Resources in respect of the spodumene and petalite pricing formula that increased the valuation (NPV) of the Arcadia Lithium Project by US$61m, from US$340m to US$401.5m.

The spodumene and petalite pricing formula, consistent with other industry contracts, is linked to the lithium carbonate price.

As with all minerals exploration, success is not guaranteed — consider your own personal circumstances before investing, and seek professional financial advice.

Further amendments to the offtake agreement include a requirement for Sinomine Resource to prepay US$10,000,000 with these funds being payable upon installation of the ball mill at the project.

PSC has also reduced the offtake volumes to be supplied to Sinomine Resource to approximately 70% of earlier agreed volumes. Offtake volumes are now classified as tonnes of spodumene, petalite and lithia units, giving PSC the flexibility to alter supply quantities of spodumene and petalite, provided the total lithia units supplied are satisfied.

The surplus is expected to give PSC flexibility to negotiate offtake terms with other lithium downstream customers and enable it to divert additional spodumene and petalite volumes to a proposed company owned, lithium carbonate facility.

PSC also confirmed that it has cancelled the build and finance component of the original transaction. This enables the company to dictate the build timetable and process which will enable PSC to commence construction of the mine and process facility sooner and potentially bring forward revenues.

All necessary mining licences and environmental approvals are in place to commence construction of the mine, process facility and tailings dam, while the company plans to enter into first engineering contracts and pioneer mine strip and tailings dam construction contracts sometime this month.

Importantly, by taking control of the build process, Prospect can ensure a greater local Zimbabwean input with respect to suppliers and workers. We are committed to building Africa’s largest lithium mine with, where possible, a Zimbabwe sourced workforce.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Maven Capital Pty Ltd (AFSL No. 418504). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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