Wesfarmers pours $45m into Ora Banda Mining’s lithium discovery
One of Australia’s largest listed companies, Wesfarmers (ASX: WES), has agreed to invest an initial $26 million into Ora Banda Mining (ASX: OBM) for a share of its significant new Western Australian lithium discovery.
Ora Banda has agreed to enter into a binding farm-in agreement with Wesfarmer’s 100% wholly-owned Brenahan Exploration Pty Ltd (BEPL) to sell 65% of the Davyhurst tenement package’s lithium upside for $26 million in cash and a 2% royalty.
BEPL has the ability to increase its stake to 80% by sole funding an additional $15 million of exploration expenditure on the tenements over the next 3 years.
A $22.1 million cash consideration is payable by BEPL upfront upon completion and the remaining $3.9 million cash consideration is payable upon earlier of the execution of formal mineral sharing, JV and royalty agreements or 30 April 2024.
Prime WA location
The Davyhurst tenements are located around 100km north-west of Kalgoorlie. The project covers around 1,200 square kilometres of land holding over 130km in length.
In April Ora Banda announced a significant lithium discovery at Davyhurst when its maiden drilling program intersects over 11 metres of spodumene at 1.28% lithium oxide in the first hole at the Federal Flag target in the tenement.
Ora Banda’s managing director, Luke Creagh, said the agreement will allow for a full investigation into Davyhurst’s lithium upside.
“The Davyhurst tenement package is very large and has never had any sustained or modern exploration programs given its disjointed and under-capitalised historical ownership. Although we have had encouraging early-stage lithium results, Ora Banda is a gold focused company and given the underexplored nature and size of this belt, we expect it would take many years to do it justice for other minerals,” Mr Creagh said.
“We are very excited by this transaction as Wesfarmers is a high calibre strategic partner who has the technical expertise and capability to unlock the belt for minerals that are non-core to Ora Banda. The Wesfarmers team that will work on this tenement package has a track record of success as they discovered and are helping deliver the Mt Holland Lithium Project.”
$45 million deal
Mr Creagh described the agreement as a $45 million dollar deal with $30 million in cash and $15 million in exploration expenditure.
“The deal structure is aligned to maximise the potential of multiple discoveries to the benefit of both parties, whilst providing balance sheet strength to Ora Banda to further grow gold production.
“We are looking forward to working collaboratively with the Wesfarmers team to unlock significant value for our respective shareholders on this highly prospective and underexplored tenement package.”
Capital raising plan
Ora Banda has also revealed capital raising plans to support its future work at Davyhurst with an agreement to effectively on-sell 1.5% of the 2% royalty to be received from BEPL to Hawke’s Point for consideration of $4 million payable to Ora Banda by Hawke’s Point Holdings.
The $4 million will be payable in cash or offset against amounts owing under the existing $11 million unsecured loan facility with Hawke’s Point.