Firefinch Limited (ASX: FFX) has provided an update on its offshoot Leo Lithium Limited and the Goulamina Lithium Project.
Jiangxi Ganfeng Lithium Co. Ltd. and Firefinch have formed a Joint Venture (JV) to develop Goulamina. The JV is subject to various conditions precedent and on satisfaction, Ganfeng will contribute US$130 million in cash to the JV and will arrange up to US$64 million in debt.
Prior to completion of the approvals and other administrative matters, the parties have been working on an update of the October 2020 Definitive Feasibility Study (Updated DFS) which will facilitate the fast-tracking of a Final Investment Decision (FID).
Ganfeng and Firefinch have also agreed to commence a major drilling programme. This will be a two year, US$6 million, significant programme comprising almost 50 kilometres of drilling.
The expected lift in reserves and resources is anticipated to rank Goulamina even higher among the largest global lithium projects and is expected to support a multi decade mine at a higher rate of production.
On completion of the proposed demerger, Leo Lithium Pty Ltd to be converted to Leo Lithium Ltd will be a standalone company which will hold a 50% interest in the JV with Ganfeng.
In connection with the demerger, Leo will seek an ASX listing. Firefinch’s strategy to advance Goulamina is to complete all commercial, technical and regulatory matters such that Leo can seek a listing on ASX with an Updated DFS complete, FID made and all funding received from Ganfeng.
This will see Goulamina’s development substantially funded, engineering and procurement already underway, and importantly, on a clear path to first production in 2023.
“Considerable progress has been made advancing Goulamina over the past few months. The key takeaway is that following the proposed demerger in 2022, Goulamina will be substantially funded, with engineering and procurement well progressed and 50km of drilling already underway,” Firefinch Managing Director, Dr Michael Anderson said.
“Importantly, Goulamina will be on a quick path to production, expected in 2023, and in an enviable position to take advantage of prevailing very strong lithium market conditions.”
Following receipt of Chinese regulatory approvals, and on advice of non-objection from the Government of Mali, the first tranche of equity (US$39m) is expected to be deposited by Ganfeng into an escrow account, in line with the conditions of the subscription agreement between the parties.
On the completion of the restructure of the JV subsidiaries, and the transfer of the Exploitation Licence for the Project to a subsidiary of the JV company, the cash will be released from escrow. That transfer is expected to be completed before the end of 2021.
The parties intend to quickly consider a FID upon receipt of the Updated DFS. The JV shareholder agreement requires that the project only exceed a 15% Internal Rate of Return (IRR) for that decision to be made, unless otherwise agreed by the parties.
FID is one of the pre-conditions for Ganfeng to make its second tranche of cash investment of US$91 million, and subsequent arrangements for up to US$64 million of debt funding. FID and the second tranche of investment are both expected to be received in December 2021.
Firefinch has progressed regulatory requirements and commenced preparing documentation to implement the demerger.
For further information please visit: https://firefinchltd.com/