Lithium Energy announces revised terms for A$97m Solaroz project sale

Lithium Energy Limited has finalized updated terms with CNGR Netherlands New Energy Technology B.V. for the A$97 million sale of its 90% stake in the Solaroz Lithium Brine Project. This significant development ensures an expedited and clearer path to completion, with all previous conditions precedent waived under the revised agreement. The cash consideration remains steadfast at US$63 million, offering a structured payout over two tranches and additional contingencies linked to lithium carbonate pricing.

Under the new structure, CNGR will issue a non-refundable second deposit of US$6 million by January 2025, following shareholder approval. Subsequent payments include US$26 million in April 2025, tied to the transfer of a 39.9% stake, and US$21.7 million in January 2026, completing the handover of the remaining 50.1%. An escrow account of US$3 million will secure the terms, while US$4.5 million remains contingent on lithium carbonate prices surpassing US$23,000 per tonne.

Lithium Energy has strategically revised the terms of sale to align with operational demands and market trends. The waiver of previously mandatory conditions, including CNGR’s foreign company registration in Argentina, reflects both parties’ commitment to streamlining the transaction. The updated terms also ensure clarity in funding responsibilities, with CNGR agreeing to provide US$15 million in project financing during the transition period.

CNGR’s commitment to the Solaroz project underscores its global ambitions in lithium supply chains. Lithium Energy’s announcement emphasized its confidence in CNGR’s financial capability, citing rigorous due diligence and a guarantee from its parent company, CNGR Advanced Materials Co. Ltd., a prominent producer of cathode materials for batteries.

Industry context and financial implications

Located within Argentina’s prolific Lithium Triangle, the Solaroz Project spans 12,000 hectares in the Salar de Olaroz Basin, neighbouring lithium production giants. It holds a significant JORC mineral resource estimate of 3.3 million tonnes of lithium carbonate equivalent, with a high-grade core offering potential for large-scale extraction.

The transaction offers substantial financial benefits, bolstering Lithium Energy’s liquidity and operational flexibility. Pro-forma adjustments suggest a strong uplift in the company’s cash reserves following each tranche, positioning it to advance its graphite projects and explore new investments in battery minerals.

Next steps and market impact

Lithium Energy’s shareholders are expected to vote on the revised terms in January 2025. With approval, the deal will transition into its execution phase, marking a transformative milestone for both parties. Market watchers are eyeing the deal as a pivotal moment in the lithium sector, given the competitive pricing and strategic alignment.

This move highlights a broader industry trend of consolidation within Argentina’s lithium sector, following Rio Tinto’s US$6.7 billion acquisition of Arcadium Lithium in October. The collaboration between Lithium Energy and CNGR exemplifies the growing synergy between Australian mining firms and Chinese battery supply chain leaders.