Perth-based explorer Zenith Minerals (ASX: ZNC) will divest a majority share of its US-based lithium assets to joint venture partner Bradda Head Ltd in exchange for a mix of cash and equity.
The $1.05 million transaction is part of Zenith’s business strategy to advance its US portfolio while focusing on its wholly-owned Australian projects.
These include the Red Mountain gold and Develin Creek copper-zinc projects in Queensland, and the Split Rocks gold asset in Western Australia.
Under the terms of the divestment, Zenith will receive approximately $320,000 in cash from Bradda and will retain a 15% equity position in the lithium assets for a period of two years or to the completion of an initial public offering in Bradda, whichever comes first.
The equity will be in the form of approximately 11.7 million Bradda shares at a deemed price of $0.062 each.
Bradda is controlled by prominent UK investor Jim Mellon.
Zenith chairman Peter Bird said the divestment would help refine the company’s strategy to focus on its core Australian business.
“Our domestic portfolio is starting to yield some very good results [so] a series of non-core commodities which require significant ongoing maintenance and spend in the value generation process have been either divested, dropped or joint ventured,” he said.
“In the case of our US lithium projects, we feel Bradda Head’s plan to move forward in return for a solid equity position [in the assets] is a good solution for both parties.”
The equity will be an important inclusion for Zenith.
“As a significant shareholder, we will assist to ensure a mutual value pathway for both companies and their respective investors,” Mr Bird said.
“We recognise there is significant interest in the battery metals sector and the Bradda Head “pure play” should ensure a good outcome for respective participants.”
Zenith’s US lithium portfolio includes the Spencer and Wilson salt flat brine projects in Nevada, close to Tesla Inc’s lithium-ion battery and electric vehicle component gigafactory and Albermarle Corporation’s Silver Peak-Clayton Valley lithium brine operation.
It also includes the San Domingo project in Arizona which contains abundant spodumene-bearing lithium pegmatites, and the nearby Wikieup-Burro Creek project.
The Burro Creek landholding was expanded in mid-2019 by additional claims in the Wickieup area contiguous with and partly surrounding Hawkstone Mining’s (ASX: HWK) Big Sandy sedimentary lithium deposit.
That year, Hawkstone defined a maiden JORC inferred resource at Big Sandy of 32.5 million tonnes grading 1,850 parts per million lithium for 320,800 tonnes lithium carbonate.
Bradda is targeting a major drilling campaign at Wikieup this year with the aim of defining a maiden resource.
Mr Bird said the US projects are “perfectly positioned” to provide future supply to the nation’s growing lithium battery market.