Core Lithium Ltd (ASX:CXO) has secured a binding offtake agreement and a multi-million-dollar investment from the world’s largest lithium company by market capitalisation.
Ganfeng Lithium, which has a market cap of around US$40 billion, has promised to offtake 75,000 tonnes of spodumene concentrate every year from Core’s flagship Finniss Lithium Project over a four-year period.
The lithium powerhouse also committed to a A$34 million equity investment at A$0.338 per CXO share — a 10% premium to the ASX-lister’s 10-day volume-weighted average price.
Multi-faceted A$140 million raise
Ganfeng’s investment forms part of a multi-faceted equity raise to secure up to $140 million that the company has described as being "transformational".
The Ganfeng agreement means Core has commitments to offtake around 80% of Finniss’ Stage 1 production over the first four years of the asset’s mine life, with a multi-stage equity raise announced to support the company’s transition to Australia’s next lithium producer.
“Transformational moment”
Speaking to Ganfeng’s offtake and equity investment, Core managing director Stephen Biggins said the deal represented a “transformational” moment for the company.
“Ganfeng has a proven track record of investing in high-quality lithium projects across the world and of being a strong and supportive offtake partner.
“We welcome Ganfeng’s participation with Core, and look forward to developing a long-lasting, mutually beneficial relationship with them.”
Biggins also claimed the capital raise equity raise, through which the company hopes to raise as much as $140 million, formed part of a pivotal moment in Core’s history.
“We now have immediate certainty over the Finniss Project funding and we remain on track to commence construction activities within the 2021 calendar year, ahead of anticipated first production in late 2022.”
Offtake agreement
Core’s offtake agreement with Ganfeng stipulates the ASX-lister will supply and deliver 300,000 dry metric tonnes of spodumene concentrate from Finniss.
Specifically, the deal provides for pricing referenced to the market price for 6.0% lithium hydroxide spodumene concentrate, adjusted for actual lithium hydroxide content, and includes an agreed floor price.
It mirrors a similar deal Core inked with major shareholder Sichuan Yahua, which also commits the ASX-lister to provide 75,000 tonnes per annum over a four-year period.
Core’s offtake commitment with Ganfeng kicks off on the first day of commercial production, which is anticipated late next year.
Equity investment
Precedent to Ganfeng’s offtake is a $34 million funding package, which Core will use to support its Stage 1 development and bring the Northern Territory lithium project into production.
In exchange for the cash injection, Core will issue more than 100 million CXO shares to the lithium powerhouse at A$0.338 each.
Of course, there are conditions to satisfy before the end of October for the investment to proceed. These include:
- Securing Chinese regulatory approvals;
- Obtaining approval from Core shareholders; and
- Core entering binding arrangements for a minimum total financing (including the equity investment by Ganfeng of no less than A$80 million.
Core’s financial adviser on this transaction is Jett Capital Advisors LLC.
Capital raise
This arrangement is one component of a multi-faceted equity raise with the funding runway to help bring Finniss into production and fully fund its Stage 1 development, for which Core has secured commitments to supply around 80% of the spodumene concentrate produced.
Core’s equity raise has three prongs, the first being a A$91 million, fully underwritten institutional placement.
Through this stage, the ASX-lister intends to issue 293 million CXO shares at A$0.31 each — a 2.4% discount to the five-day volume-weighted average price.
Then, through the equity investment with Ganfeng, Core hopes to raise a further A$34 million.
Finally, under a non-underwritten share purchase plan, the lithium producing hopeful aims to secure another $15 million at the same price as the placement.
Core Lithium hopes to get construction on the Finniss project underway in the current half as it works to become Australia’s next lithium producer.