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Leo Lithium (ASX:LLL) has announced its execution of a binding US$342.7M sale agreement with Ganfeng for 100% of the former’s Goulamina project.
Goulamina is Leo’s flagship lithium play based in Mali, West Africa, and Ganfeng will now pay a 1.5% gross revenue to Leo over the next 20 years in return for offtake rights.
Those offtake rights have been given up by Leo in a termination of the co-op agreement with the Mali government that previously underpinned the project.
Since January, Leo and Ganfeng were previously operating the project as a JV when the latter acquired a 40% stake after buying 5% of the project for just short of A$100M.
Now Ganfeng will buy the remaining 60% for just over half a billion Australian dollars.
So why is the company selling off the entire project? It can’t manage to broker a workable relationship with the Malian government.
“Despite our best efforts to reach a viable agreement with the Mali Government and considering the increasing risks associated with operating in Mali … the Board of Leo Lithium has determined that a sale of the Company’s remaining interest in Goulamina is in the best interests of Leo Lithium shareholders,” company MD Simon Hay wrote on Wednesday.
“The Board believes the executed Sale and Purchase Agreement with Ganfeng provides our shareholders with certain value under highly challenging circumstances.”
That certain value has been estimated at roughly 43c per LLL share as of market close on Tuesday. Barrenjoey acted as financial advisor the deal with Thomson Geer doing legal.
“Our relationship with Ganfeng remains strong, and we look forward to the next phase of our partnership.”
Leo announced on Wednesday it has inked an MoU with the Malian government to pay the latter US$60M in a settlement that stands to settle ongoing issues.
LLL last traded at 51cps.
