Sovereign Gold Company Ltd (ASX:SOC) has exercised an option to acquire a lithium project located near one of the world's largest lithium producers, Albemarle Corporation (NYSE:ALB).
The project is located in the Clayton Valley Basin in the U.S state of Nevada and is within 400 kilometres of the Tesla Motors Inc (NASDAQ:TSLA) mega-factory.
Due diligence on the project has revealed it has potential to host lithium-bearing aquifers and subsurface lithium rich clay-style deposits.
Other listed Clayton Valley land holders include Lithium X Energy Corp (CVE:LIX) and Pure Energy Minerals Ltd (CVE:PE).
Sovereign will pay US$100,000 and issue 12.5 million shares and 12.5 million options.
Sovereign plan to drill test extensions of aquifers discovered on adjacent claims.
Lithium project details
The project is comprised of 111 claims and a completed gravity survey indicates a thick potential lithium-bearing stratigraphy is present from surface down to 400-800 metres.
Adjacent and neighbouring Matica Enterprises and Pure Energy drilling results to date indicate the 111 claims are favourably situated for the potential existence of ash unit hosted lithium brines
Sovereign will drill test for extensions of aquifers discovered by Pure Energy in their adjacent claims and also drill test where Matica’s adjoining claims represent a very promising first order target for lithium brine exploration.
Acquisition terms
Consideration for the acquisition will be 12.5 million shares and 12.5 million options exercisable at $0.006 with a 3 year expiry.
A cash payment of US$100,000 will also be required upon completion of the acquisition.
A further A$175,000 or 35 million shares are to be issued upon confirmation of a JORC-compliant Inferred lithium carbonate resources of at least 300,000 tonnes.
Recent rights issue
Sovereign recently closed an over-subscribed rights issue priced at $0.003 per share.
The offer raised $1.18 million, which will be used for the acquisition of the lithium project and to progress the Mt Adrah and Halls Peak gold assets.
Background
Sovereign recently completed a strategic review, which has seen the company focus on lithium and gold.
The Mt Adrah Gold Project remains a strong focus for the company which contains a Mineral Resource estimate of 770,000 ounces of gold within a total Mineral Resource estimate of 20.5 million tonnes at 1.1 g/t gold.
Sovereign will continue to assess domestic and international gold and lithium opportunities with a focus on acquiring projects near known discoveries and production areas.
Analysis
This acquisition transitions Sovereign into a lithium explorer in a world class area.
This project is located near to, Albemarle, one of the world’s largest lithium producer's Silver Peak operations, which has been in operation since 1967.
Albemarle acquired Rockwood Holdings and Rockwood Lithium in early 2015 allowing it to become a world super power in the lithium space.
Tesla’s mega factory is an industrial installation in the Nevada desert designed to make electric cars mainstream by reducing the costs of lithium ion batteries through mass production.
Tesla has publicly stated that they wish to source as many raw materials as possible from North America to build a viable domestic supply chain and minimise transportation costs.
Sovereign will potentially add a further prospective lithium projects to their new portfolio in the coming months.
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