Neometals and Minerals Resources score Chinese lithium offtake deal

THE BOURSE WHISPERER: Neometals (ASX: NMT) announced the signing of a Memorandum of Understanding (MoU) between the company’s sub-subsidiary and a Chinese lithium producer.

This gets confusing, but stick around.

Neometals and Mineral Resources (ASX: MIN) (via its wholly-owned subsidiary Process Minerals International (PMI)) jointly announced their jointly-owned subsidiary, Reed Industrial Minerals (RIM) entered into said MoU with China’s second largest lithium producer, Jiangxi Ganfeng Lithium Co.,Ltd.

The MoU is in regard to offtake for spodumene produced from the JV’s Mt Marion lithium project in Western Australia.

“This MoU is an exciting milestone achievement for Neometals and RIM, and we look forward to working with our project partners to progress the Mt Marion project to the next stage of its development,” Neometals managing director Chris Reed said in the company’s announcement to the Australian Securities Exchange.

The company explained the MoU sets out the key commercial terms for:

Ganfeng to acquire an up-front 25 per cent shareholding in RIM by way of share sale and equity subscription leaving Neometals with 45 per cent of RIM and MIN with 30 per cent of RIM. Neometals will net approximately US$19.5 million from this initial transaction;

PMI and Gangeng to be granted options by Neometals pursuant to which they can elect to increase their respective shareholdings in RIM to 43.1 per cent by around Q4 of 2016 by way of share purchase from Neometals. If these options are fully exercised, Neometals will be left holding 13.8 per cent of RIM;

MIN building, owning and operating the Mount Marion mining, crushing and beneficiation infrastructure and equipment pursuant to a fixed price mining services contract;

Ganfeng entering into a long-term offtake for 100 per cent of the spodumene produced from the Mt Marion lithium project at benchmarked market prices subject to an agreed price floor. Under the agreement, from year four onwards RIM reserves the right to take 51 per cent of the total production if greater commercial benefit can be derived from such product; and

Prudential corporate governance arrangements for RIM between Ganfeng and RIM’s existing shareholders with equal board representation for all shareholders.

According to the announcement MIN is well-advanced with development planning and procurement, with commissioning and production of lithium concentrate product anticipated by mid-2016.