- Arcadia Minerals (AM7) announces potential deal with Chinese multinational
- The deal is with HeBei Xinjian Construction CC for the construction of both a tantalum and lithium processing facility, plus take-off of products from Arcadia’s Swanson tantalite project
- The project’s JORC mineral resource currently sits at 3.6 million tonnes – over five times the size of the nearby Homestead mine which was recently acquired by HeBei
- Both parties hope to conclude negotiations as early as possible, with signing scheduled for Q1 2023
- Arcadia Minerals last traded at 22 cents at 1:50 pm AEDT
The New Year buzz at Arcadia Minerals.
Every new year brings a certain amount of anticipation with it, but at Arcadia Minerals (AM7) the excitement is building even more frenetically than usual.
Things are beginning to move very quickly on the Arcadia-owned tantalum and lithium prospect in Namibia, known as the Swanson tantalite project. The company owns the project through local Namibian-registered company Orange River Pegmatite (ORP).
The source of the enthusiasm is an agreement in the making with a Chinese construction company located in Namibia. But before we get into the detail on this, let’s explore the context of the deal.
China – land of the voracious appetite.
Everything about China is big. It has the world’s largest population and the world’s largest economy (according to the IMF). So when the Chinese take an interest in something, that something has the potential to go huge – especially when it involves manufacturing and consumption.
Right now, China is intensely focused on the field of environment, social and governance (ESG) as it strives to change its status as the world’s largest greenhouse gas emitter. To help achieve that, the country has embarked on an ambitious plan to realise net zero emissions by 2060 – and according to the World Economic Forum (WEF), China could bring its peak CO2 emissions forward from a planned 2030 to as early as 2026.
The role of lithium.
One of the key elements of China’s emissions reductions strategies is to achieve a decline in demand for oil for transport, which accounts for up to 17 percent of greenhouse gas emissions worldwide.
That means more electric vehicles (EV) on the road, and that’s where China is absolutely leading the world. The country recorded an estimated EV sales volume of 3.82 million vehicles in China alone for 2022 and is investing billions in rolling out charging stations.
With over 450 registered EV manufacturers in China and a booming export market estimated to provide 15 percent of the world EV market by 2025, it’s a seismic change for China and the world.
Given your average Tesla has about 5 kilograms of lithium in its batteries, that’s an awful lot of demand for the metal coming down the pipe if, as predicted, this trend continues.
The extraordinary growth in demand over the last several years is reflected in the fact that the price of lithium jumped from under USD$10,000 per tonne (A$14,295) in late 2020, pushed through $USD40,000 in January 2022, and now sits above USD$70,000. The price of spodumene, a lithium source mineral, has experienced similar leaps over the last eighteen months.
Chinese companies getting in on the action.
No wonder the humming lithium market is attracting plenty of interest and activity from major Chinese players. One of the biggest stories to emerge this year has been the joint venture between China’s Tianqi and Australia’s IGO to buy Aussie lithium developer Essential Metals for a cool AUD$136 million.
Similar stories have been played out from the Democratic Republic of the Congo to Argentina over the last couple of years, as Chinese companies reach out to the limited number of high volume lithium producers around the world to secure supplies.
Now – back to Arcadia.
Against this galvanising background, Arcadia’s announcement of a letter of intent to complete a deal with Chinese multinational group HeBei Xinjian Construction CC has the company and a great many investors abuzz.
Once completed, hopefully in the first quarter of this year, the deal will combine HeBei funding of both a tantalum and a lithium processing facility, and an ever-green take-off of both metals from the Swanson deposit.
HeBei is keen.
It’s interesting to note that Hebei recently acquired the nearby Homestead mine from AIM listed Kazera Global, gaining a foothold in the area Kazera shares with the Swanson Project. The deal included USD$13 million (A$18.5 million) payment and ongoing sales share, indicating the value with which the Chinese corporation views the purchase.
The mineral resource at Kazera amounts to some 668,000 tonnes in total, while the JORC declaration of the Swanson mineral resource is more than five times as big, at around 3.6 million tonnes. Unlike Kazera’s property, which has been explored exhaustively, Arcadia owns large tracts of unexplored prospective land in region, adding additional value to the Swanson project.
A swift negotiation.
The speed of the negotiation and the obvious enthusiasm of both partners to get the transaction finalised as early as possible this year indicate the strong potential for the Swanson Project to become what Executive Chairman of Arcadia Jurie Wessels calls an “early cash generator.”
Mr Wessels also said that “Our next steps are to engage with HeBei and other suitors through negotiation to possibly conclude a transaction as early as is reasonably possible.”
On Tuesday 10 January, Arcadia (ASX: AM7) shares were trading at $0.24, up from the previous day’s $0.19 – so it’s entirely possible that the excitement immersing the company is spreading.