Charger Metals secures Rio Tinto backing for Lake Johnston lithium project
Charger Metals (ASX: CHR) is to be joined by Rio Tinto (ASX: RIO), the world’s second largest mining company, in its hunt for lithium in Western Australia after entering into a binding farm-in agreement for the Lake Johnston lithium project.
The farm-in deal with Rio Tinto subsidiary Rio Tinto Exploration (RTX) was part of a series of corporate moves by Charger that includes it moving to 100% ownership of Lake Johnston by signing an agreement with Lithium Australia (ASX: LIT) to purchase its minority interest in the project for $2 million.
Rio will provide Charger with an up-front payment of $500,000 and invest $1.2 million in Charger prior to commencement of farm-in activities.
Rio has also committed to outlay a minimum of $3 million in exploration expenditure over the first 12 months.
The agreement also includes an opportunity for Rio to earn 51% of the project by sole funding $10 million in exploration expenditure and paying Charger further cash payments of no less than $1.5 million.
It can then increase that to a 75% interest by sole funding $40 million in exploration expenditure or completing a definitive feasibility study (DFS).
Charger’s managing director Aidan Platel said the farm-in has highlighted the prospectivity of the Lake Johnston project and its potential to host a large-scale lithium deposit.
“The Rio Tinto Exploration farm-in agreement is an excellent result for Charger and its shareholders and reaffirms our belief that the Lake Johnston Project has potential to host a large-scale lithium deposit,” Mr Platel said.
“The planned significant investment by RTX will allow thorough systematic exploration over all of the project tenure, with initial exploration focused on fast-tracking the Medcalf Spodumene Prospect as well as progressing the Mt Day and Mt Gordon lithium prospects.”
This latest move is part of Rio Tinto’s recent acceleration of its entry into the “red hot” Western Australia lithium exploration arena. It has been estimated that Rio has obtained more than 145,000 hectares in exploration interests in recent times.
Charger chairman Adrian Griffin said under the farm-in Rio Tinto Exploration could potentially spend up to $42.5 million to earn up to a 75% interest in the project.
“The largely unexplored Lake Johnston Greenstone belt now hosts multiple spodumene discoveries and with the recent focus and increasing exploration activity could evolve into a prominent lithium province,” he said.
A win-win for Charger and Lithium Australia
Lithium Australia chief executive officer and managing director Simon Linge said the deal with Charger was beneficial to both companies.
“We are excited by the opportunity to engage with Charger Metals regarding the sale of Lithium Australia’s remaining holding in the Lake Johnston lithium project. As a significant shareholder of Charger, we are excited by the partnership between Rio Tinto and Charger and believe this provides a win-win outcome for all,” Mr Linge said.
“The transaction reaffirms our commitment to focusing on our core operations, while aligning the Company to its ESG ambitions. Lithium Australia also retains optionality to secure any future lithium offtake from successful resource development to support our battery materials business. I am excited by our future prospects and believe this transaction will help us to lead and enable the global transition to sustainable electrification.”
Located in a promising neighbourhood
Situated 450km east of Perth, the Lake Johnston lithium project occurs within an estimated 50km long corridor along the southern and western margin of the Lake Johnston granite batholith.
The project is sited approximately 70km east of the large Earl Grey deposit at the Mt Holland lithium project which is under development by Covalent Lithium on behalf of joint venture partners Sociedad Química y Minera de Chile S.A. and Wesfarmers (ASX: WES).
Mt Holland has been estimated as one of the largest hard-rock lithium projects in Australia with ore reserves for the Earl Grey deposit estimated to contain 189 million tonnes at 1.5% lithium oxide.