Leo Lithium Limited (ASX:LLL) has executed a strategic placement and entered a transformational cooperation agreement with China’s largest lithium producer Ganfeng Lithium.
The cooperation agreement encompasses a range of key strategic benefits to Leo Lithium, including a commitment to expand the capacity at Goulamina to a million tonnes per annum, a framework for further cooperation on a downstream conversion facility and other beneficial business opportunities.
The strategic placemen to Ganfeng will raise $106.1 million from the issue of 131 million new shares, representing 9.9 per cent of Leo Lithium’s total pro-forma shares on issue.
The placement offer price of 81 cents per share is based on a 6.5 per cent premium to Leo Lithium’s five-day volume weighted average price – Leo Lithium’s all time share price high is 82 cents.
Proceeds from the placement will ensure the company is fully funded for its share of Goulamina’s stage one development and operational ramp-up costs, as well as being well-positioned to progress its various co-commitments with Ganfeng as part of the cooperation agreement.
The cooperation agreement is expected to deliver several long-term strategic benefits to Leo Lithiu, both at Goulamina and beyond.
These include conducting a study into raising planned stage two capacity to 500 kilo tonnes per annum and lifting overall planned capacity at Goulamina to one million tonnes a year; and jointly studying the concept of co-investing in a downstream conversion facility in Europe or other suitable region within a reasonable distance of West Africa.
It also includes amending the offtake agreement for Goulamina stage two for the potential future downstream conversion facility to produce lithium hydroxide and establishing and jointly funding an exploration joint venture to focus on opportunities in Australia.
Leo Lithium Managing Director Simon Hay said the strategic placement and terms of the proposed cooperation agreement with Ganfeng represented a transformational opportunity for Leo Lithium and provide further validation of the tier-1 quality of Goulamina, including the significant potential upside of our development pathway.
He said: “The proposed tolling arrangement with Ganfeng provides Leo Lithium with a highly beneficial, low-risk solution to gain exposure to lithium hydroxide production and the attractive margins that are available from moving further downstream.
“Ganfeng has long operated a number of conversion facilities in China and is already producing a large volume of high-quality battery grade product that is being supplied to tier 1 OEMS.
“By utilising the tolling arrangement with Ganfeng, Leo Lithium stands to benefit from Ganfeng’s existing strong market relationships and technical reputation, enabling enhanced cost savings and operational efficiencies in tolling the Goulamina stage two product to lithium hydroxide.”
The hard rock Goulamina Lithium Project in Mali will be the first of its kind in West Africa, with construction underway and first production targeted for the first half of 2024.
The project has a Mineral Resource of 142.3 million tonnes at 1.38 per cent lithium (3.9 million tonnes lithium carbonate equivalent) and ore reserve of 52 million tonnes at 1.51 per cent lithium (1.9 million tonnes lithium carbonate equivalent).