Prospect Resources is selling a majority stake in its Zimbabwe flagship lithium project to China’s Zhejiang Huayou Cobalt Co for $528 million in cash.
The West Perth-based developer announced to the market today that it had struck a binding agreement to sell 87 per cent of the Arcadia lithium project to Zhejiang Huayou subsidiary Huayou International Mining.
Prospect acquired the project in 2016 and had secured an offtake agreement with Belgium-based industrial minerals company Sibelco for the project in 2020.
The company says it has received seven non-binding proposals to advance the project since then from a “range of international parties”, including joint venture offers and acquisitions.
The existing offtake is set to be terminated as a condition precedent to the deal.
Consideration for the buy equates to roughly $1.23 per share, representing a 78 per cent discount on Prospect’s 10-day volume weighted average price.
The transaction will be subject to approval from Prospect shareholders and Chinese regulatory approvals, with Prospect directors already in support of the buy.
Prospect managing director and chief executive Sam Hosack said his team was delighted with the outcome.
“The Prospect Board has undertaken a detailed evaluation of all proposals received through this competitive process,” Mr Hosack said in a statement.
“The conclusion of this evaluation is that the Huayou proposal offers a highly attractive risk-adjusted proposition for Prospect shareholders, particularly when considered against the timing and execution risks attached to development and operation of the Arcadia Project either under Prospect’s ownership or in joint venture.”
An Extraordinary General Meeting is set to be held in the new year.
Prospect anticipates the buy will be completed by 2022’s second quarter.
Prospect’s financial advisers are Azure Capital and Vermilion Partners, and its legal advisers are King & Wood Mallesons in Australia and Manokore Attorneys in Zimbabwe.
Huayou’s exclusive financial adviser is Canaccord Genuity, and its legal advisers are Minter Ellison in Australia, Jingtian & Gongcheng in China, Scanlen & Holderness in Zimbabwe and Morgan Lewis Stamford in Singapore.
Prospect Resources shares are up 3.27 per cent to trade at 79 cents.
