Cadence enters conditional sale agreement of its equity stake in Lithium Technologies and Lithium Supplies

Highlights

• Cadence and all LT and LS shareholders have entered into a conditional agreement to sell 100% of LT and LS for up to AUS$21.05 million (£11.82 million).
• Cadence owns 31.5% of LT and LS and would receive up to AUS$6.63 million (£3.72 million).
• The consideration payable to LT and LS shareholders will be via a mixture of cash and shares.
• The buyer will spend a minimum of AUS$4 million over three years from the completion of the sale on the exploration of the Litchfield lithium prospect in Northern Australia.

Cadence CEO, Kiran Morzaria, commented: “On behalf of the Cadence board and the other LT and LS shareholders, we are pleased to report that we have reached a conditional agreement with a public, unlisted Australian company to sell LT and LS.”

“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 the exploration upside. Lastly, given the commitment of at least AUS$4 million to explore the primary assets, this mitigates dilution to Cadence shareholders.”

“Moreover, this transaction will also allow our management team to focus on delivering additional value through our ongoing involvement in developing our flagship Amapa Iron Ore project.”

The consideration for LT and LS is up to AUS$ 21.05 million (£11.82 million). Cadence has 31.5% of LT and LS and would receive up to AUS$ 6.63 (£3.72 million). The buyer is a public, unlisted company in Australia.

LT and LS, through their subsidiaries, are the holders of two prospective exploration licenses and one exploration application in Australia and a further seven exploration license applications in Argentina.

All of the licenses and applications target prospective hard rock lithium deposits. The most significant of these is the Litchfield lithium prospect, which is contiguous to Core Lithium's strategic Finniss Lithium Project (JORC compliant ore reserves: 7.4 million t at 1.3% Li2O).

The acquisition of LT and LS has several conditions precedent, including the completion of due diligence and the relevant regulatory approval. Assuming this is successful, the Buyer will acquire 100% of LT and LS through a mixture of cash and shares partially paid on completion of the sale of LT and LS and the remainder paid on the achievement of key performance milestones.

The net loss of LT and LS were AUS$1560 and AUS$1306, respectively, for the year ended 30 June 2021. As such, the net loss attributable to the company (being 31.5% of LT and LS) was AUS$903 (£516). As of 31 December 2020, the carrying values of LT and LS in the company's balance sheet was approximately £337 000 and £237 000, respectively.

The first three milestone payments are payable once a JORC resource is of not less than 12 million tonnes of lithium oxide is proved at Litchfield. The fourth milestone payment is payable on completing a definitive feasibility study on Litchfield. The buyer can also pay the milestones payments in equity, using a defined pricing mechanism.

The buyer has committed to spending at least AUS$4 million on the exploration of Litchfield during the three years post the completion of the sale. Should the milestones not be achieved during this period, the respective consideration will not be payable.

Read the article online at: https://www.globalminingreview.com/finance-business/31032022/cadence-enters-conditional-sale-agreement-of-its-equity-stake-in-lithium-technologies-and-lithium-supplies/