Voltaic Resources (ASX:VSR) and Delta Lithium (ASX:DLI) announced on Monday they’ll be teaming up on a $12M deal to advance the WA-based Yinnetharra lithium project on a JV farm-in basis.
Both shares were in the green in the first hour of Monday trades with microcap Voltaic boasting the more impressive 15% jump to 2.3cps. Delta shares were up more than 3% on the news as at 10.50am AEDT.
The 26Mt project grading at 1% lithium is now firmly in Delta’s crosshairs, should it so desire – DLI has the right to earn up to an 80% stake over 4 years. The earn in process is described as two stage.
The ease with which Delta could achieve this is notable. The company only needs to spend $3M to get a 51% majority interest in the project; its minimum spend requirement is $1M.
You could call it a low hanging fruit – so clearly, Voltaic isn’t in a position to play hard to get.
Delta has a market cap of $238M and is rated a ‘Buy’ by 5 brokers. Its one month returns are up +13.56% but YTD performance sits at -28.72%. However, the stock is cashed up – it ended December with $116M.
For Voltaic, it gets to see its Yinnetharra potentially boosted into a long-life lithium play.
There’s also the fact Voltaic boasts a market cap of $11M, has a liquidity problem, and ended December with $5.9M.
Both companies were also keen to ignore the reality of tanking lithium prices in their communications on Monday. The very fact of a farm-in agreement, however, reflects this.
Especially given that Voltaic is looking for a “de-risked pathway to production and cashflow” – in other words, they can’t do it on their own. A looming wave of consolidation in the microcap space was flagged by ANZ’s junior mining rep at an RIU conference earlier this year.
Delta last traded at 33.3cps; Voltaic at 2.3cps.