Cadence Minerals has entered into a conditional agreement to sell its 31.5% stake in Lithium Technologies and Lithium Supplies (LT and LS) for £3.72m.
Both Cadence and LT and LS shareholders have agreed to sell 100% of Lithium Technologies and Lithium Supplies for a consideration of £11.82m to an unlisted Australian buyer to be paid in cash and shares.
The conditions for the agreement entails obtaining the required regulatory approval and completing the due diligence.
The payments from the Australian buyer will be broken into parts, with partial payment on completion of the sale and the remainder on achieving ‘key performance milestones’.
The buyer will also be investing a minimum of A$4m over 3 years from the completion of the sale on the exploration of the Litchfield lithium prospect in Northern Australia.
Consideration on completion of the sale
The consideration will be broken down in part payments, with 4 installments payble only on achieving key milestones.
Once a JORC resource of at least 12m tonnes of lithium oxide is proven at Litchfield, the first 3 milestone payments will be payable. Cadence will receive A$2.52m from the total of the first 3 payments.
The fourth milestone payment of A$945,000 to Cadence is due when a thorough feasibility study on Litchfield is completed.
Using a stated pricing mechanism, the buyer can potentially pay the milestone payments in equity.
Cadence CEO Kiran Morzaria commented, “Recent exploration and sampling work at the Litchfield project and the project’s proximity to Core Lithium’s assets have led us to believe that Litchfield has considerable potential to host lithium mineralisation.”
“In addition to this, the other lithium assets held by LT and LS provides the buyer with several attractive targets to explore and develop.”
“For Cadence, this transaction is, we believe, an excellent balance of risk and reward. Firstly it provides an initial consideration that more than covers our book investment.”
“Secondly, by partly paying the consideration in shares in the buyer and cash payment on milestones we are exposed to the exploration upside. Lastly, given the commitment of at least A$ 4 million to explore the primary assets, this mitigates dilution to Cadence shareholders.”
LT and LS own two prospective exploration licences and one exploration application in Australia, as well as seven exploration licence applications in Argentina, through their subsidiaries to target hard rock lithium deposits.
The Litchfield lithium project, which is contiguous to Core Lithium’s strategic Finniss Lithium Project and has JORC compliant ore reserves of 7.4m tonnes at 1.3% Li2O, is the most significant of the deposits.
Cadence Minerals’ shares increased by 1.5% to 16.8p after the news of the conditional agreement for the sale of its stake in LT and LS.