Prospect Resources tops up cash reserves, alters Sinomine offtake arrangement to secure better terms
Main pegmatite outcrop at Prospect Resources’ Arcadia Pit.
Prospect Resources (ASX: PSC) has completed its A$10 million placement to two Sinomine entities, as well as amending an existing offtake agreement with another Sinomine division for its Arcadia lithium project in Zimbabwe to secure “more favourable” financing terms.
The A$10 million share placement was completed to Sinomine Resources Exploration and Sinomine International Exploration (Hong Kong).
Under the placement, Prospect issued Sinomine Resources Exploration and Sinomine International Exploration (Hong Kong) with more than 166 million ordinary shares at A$0.06 each.
Finance and offtake revisions for Arcadia
Additionally, the offtake contract with Sinomine Resource (Hong Kong) International Trading was altered to terminate the build and finance component and include an extra US$10 million offtake prepayment.
A part of the modified contract, Sinomine Resource (Hong Kong) will hand over US$10 million after the ball mill has been installed at Arcadia.
Another contract revision includes cutting the volumes to 70% of the previously agreed amount.
The volumes have been changed to tonnes of spodumene, petalite and lithium to allow Prospect to adjust petalite and spodumene supplies, while ensuring lithium volumes are adhered to.
Prospect will now deliver 280,000 tonnes of 6% lithium spodumene concentrate and 784,000t of petalite concentrate over seven years, which the company estimates will be worth almost US$560 million.
According to Prospect, the surplus concentrates will either go to other downstream users after offtake contracts have been secured. It also affords Prospect the flexibility to divert its surplus to its own proposed lithium carbonate processing facility once it has been developed.
The build and finance component of the original agreement has been canned, which Prospect claims enables it to have better control over its development timetable and financing terms.
To take advantage of the project’s enhanced net present value of US$401.5 million compared to US$340 million, and Zimbabwe’s altered landscape, Prospect hopes to fast-track the project’s development time-line and lock in new financing arrangements by mid-year.
The company is debt-free, has A$20 million in cash, the promise of US$10 million offtake prepayment and a capital expenditure of US$52.5 million to get Arcadia off the ground.
Prospect said it had received several “indicative financing approvals” which it hopes to cement at the upcoming Hong Kong Mines & Money conference.
Shares in Prospect fell more than 7% to A$0.051 in mid-afternoon trade.