Takeover target Liontown Resources (ASX:LTR) will farm into the Mulline and Mulwarrie Lithium projects in Western Australia, which are owned by Western Australian exploration company Olympio Metals (ASX:OLY).
As part of the farm-in agreement, Liontown must complete a geochemical program of 1,100 samples across both projects to make an initial assessment before deciding to proceed to the stage one earn-in. Liontown will also be required to use best endeavours to complete this program within 4 months and may decide to withdraw from the agreement at that time with no interests in the project.
Following this, Liontown may elect to proceed to stage one once the minimum commitment has been met, and can earn a 51% interest in the Mulwarrie and Mulline projects by spending $400,000 on exploration over a 12-month period. At the completion of the stage one farm-in, Liontown will have earned the right to 51% equity in the projects.
Once Liontown has earned this interest, Olympio can elect to end the farm-in and form a joint venture (JV) with Liontown holding 51% and Olympio holding the remaining 49%, and both companies each contributing pro-rata to their share in the JV with Liontown being the manager of the JV. This JV will be on standard commercial terms.
If Olympio does not elect to end the farm-in and form a JV, Liontown may earn a further 39% interest in the projects by sole funding a further $1 million on exploration within a 3-year period from the completion of the minimum commitment. This will not occur if a JV has been formed.
At the completion of the stage two farm-in, Liontown will hold a 90% interest in the projects with Olympio holding the remaining 10%. At this point, Olympio can again elect to enter into a JV agreement and contribute pro-rata to the exploration expenditure.
If Olympio does not elect to form a JV at the end of stage two, its 10% interest will convert to a 1% gross revenue royalty payable on product sold from the projects. Liontown has the right to buy back half the royalty by making a $2 million payment to Olympio.
Despite today’s announcement of the acquisition, Liontown is the target of US-based specialty chemical company Albemarle (NYSE:ALB), which has made 3 bids to acquire the company over the past 5 months.
Commenting on the agreement, Olympio Metals Managing Director Sean Delaney says: “We are very pleased to partner with Liontown, a well led company that has significant lithium discovery and development experience. With Liontown’s Kathleen Valley mine under construction, they recognise the importance of the discovery of further lithium deposits.
“With Liontown’s Kathleen Valley mine under construction, they recognise the importance of the discovery of further lithium deposits”
The Mulwarrie and Mulline projects contain a number of pegmatites that demonstrate the right geology but have not been fully tested. We are excited by the plans that Liontown has for the projects. Importantly, Olympio retains significant exposure to discovery success with the ability to contribute to funding and remain at 49% once Liontown has completed the stage one farm in.”
Olympio reports Liontown will start work immediately on the areas subject to the farm-in agreement at Mulwarrie and Mulline. The company also notes it will continue its exploration in the other project areas.
Meanwhile, on 28 March, Liontown again rejected an unsolicited, conditional, and non-binding indicative offer via a scheme of arrangement from Albemarle (NYSE:ALB), which was the third bid in 5 months.
Under the latest proposal, Albemarle has sought to acquire all of the shares in Perth-based Liontown at $2.50 per share, which at the time valued Liontown at $5.2 billion on an enterprise basis.
On 28 March, Liontown unanimously rejected the offer for the third time, determining it ‘substantially’ undervalues Liontown and is not in the best interest of shareholders.
Albemarle says the latest offer is a ‘compelling’ opportunity for Liontown shareholders with a per share consideration representing a ‘substantial’ premium for the target’s shareholders.
Olympio Metals is a West Australian exploration company focused on exploring for carbonatite hosted rare earths in South Australia, along with lithium and gold in the Kalgoorlie and eastern Kimberley of Western Australia respectively.
The company currently holds the Eurelia Project in South Australia, the Mulwarrie, Mulline, Canegrass, Emerald, and Camelot sub-projects within the Goldfields Project near Kalgoorlie, and the Woodward Range, Rubens, Mt Carmel, Dry Creek, and Slinky Hill sub-projects within the Halls Creek Project in the East Kimberley region.
Liontown Resources is an Australian battery minerals producer focused on bringing its Kathleen Valley lithium project into production. Kathleen Valley is located near Leinster in Western Australia, and is expected to supply around 500,000 tonnes @ 6% lithium oxide concentrate per year when it comes online in 2024. The company also holds the Buldania Project located about 600km east of Perth.
Images: Liontown Resources Ltd & iStock
