Lithium Energy (ASX: LEL) shareholders have voted in droves to stamp their approval for the US$63 million (AU$97 million) sale of the company’s entire interest in the Solaroz lithium brine project in northern Argentina.
About 99 per cent of the company’s shareholders yesterday voted in favour of the sale to Chinese-owned CNGR Netherlands New Energy Technology (CNNET), with a first deposit payment of $2.8 million already in the bank.
Details in Lithium Energy’s prospectus before it listed in 2021 show that it agreed to convert a US$140,000 (then AU$196,893) loan to the company (Hananta) that ultimately bought the Solaroz project, into a 90 per cent stake in that firm. Hananta, under Lithium Energy’s majority ownership, then agreed to pay nearly US$6 million for Solaroz, which has since been drilled and upgraded.
The new agreement revealed yesterday includes the sale of Lithium Energy’s 90 per cent stake in Solaroz S.A., the Argentine company that now owns the Solaroz project. Also as part of the deal, it will give up a US$13 million (AU$20 million) loan owed by Solaroz S.A. to the buyer.
The remaining 10 per cent of the project will continue to be retained by local minority holder Hanaq Argentina.
Of the US$61.2 million (AU$94.1 million) balance, US$53.7 million (AU$82.6 million) will be paid on completion, US$3 million (AU$4.6 million) will be held in escrow for two years as security for Lithium Energy’s performance under the sale agreement and US$4.5 million (AU$6.9 million) is set out as a deferred consideration if the lithium carbonate price exceeds US$23,000 (AU$35,400) per tonne during any four-month period within the 12 months following the deal’s completion.
Several other conditions, including Argentinian and Chinese regulatory approvals and environmental and concession-related approvals for the project, still need to be received before completion is triggered and must get the tick by October 25, with a possible extension of up to 60 days.
Lithium Energy has indicated that if the sale is not completed by October 25, it will seek an extension from the ASX. The company also acknowledged that its shares may be suspended from trading on the ASX on completion unless it can demonstrate it is not merely an investment company, but has sufficient level of exploration and operational activity to justify continued quotation.
The sale of the project is a significant shift for the company, which now plans to focus on pushing an initial public offering (IPO) to the market for an entity to be known as the Axon Graphite, in addition to exploring new investment opportunities in the battery minerals sector.
Back in April, Lithium Energy inked a deal with ASX-listed Novonix to combine their adjoining Queensland graphite projects and create the Axon spin-out company. The IPO is seeking to raise $25 million at 20c a share, with Lithium Energy retaining up to 28.6 per cent of the new company after listing.
According to the company’s announcement at the time, the combination of two high-grade graphite deposits will provide for potentially significant operational synergies and economies of scale as it plans the development of a vertically-integrated battery anode manufacturing facility (BAM) based in Queensland.
With its coffers filling up nicely and the imminent listing of Axon while remaining a minority holder, the timing could not be better for Lithium Energy to clean the slate as it looks to rinse and repeat the strategy of investing in new, but beaten-down battery minerals projects.
And for a company that has just 112 million shares on issue, a collect of $97 million is not a bad day’s work.
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