Castillo Copper Ltd (LSE:CCZ, FRA:7OR, ASX:CCZ) has secured a 90-day option to acquire two highly prospective Australian lithium projects.
CCZ is well funded for the potential acquisition, which will be subject to successful due diligence.
The first project is the Litchfield Lithium Project, which is contiguous to Core Lithium’s strategic Finniss Lithium Project that has JORC-compliant ore reserves of 7.4 million tonnes at 1.3% Li2O with production slated to commence in 2H 2022.
Its second acquisition target is the Picasso Lithium Project in the Norseman region of Western Australia, which is near Liontown Resources (ASX:LTR)’ Buldania Project with a JORC- compliant resource at 14.9 million tonnes at 0.97% Li2O3 and has mapped pegmatites that potentially host lithium mineralisation.
Complements copper in battery metals race
CCZ has been discussing the diversification of its asset portfolio as part of an overall strategic review into the company’s direction.
Adding lithium to its existing copper assets is seen by the company as giving it a point of difference, as the world transitions to renewable energy sources and further adopts electric vehicles as a primary mode of transport.
Copper and lithium are vital to this transition.
“Acquiring prospective lithium projects, which complement the copper assets, arguably provides CCZ a strong comparative advantage moving forward,” CCZ’s managing director Simon Paull said.
“In focusing on developing copper and lithium projects, the board is positioning CCZ to potentially create significant incremental value from the transition towards renewable energy sources and accelerating demand for electric vehicles globally.”
About the lithium projects
The first target acquisition is the Litchfield Lithium project in the Northern Territory.
Litchfield is an underexplored, mineral-rich region close to Darwin Port. It is in the Bynoe pegmatite field, which is known to host lithium mineralisation.
Project neighbour is CXO’s contiguous Finniss Lithium Project, which has four demonstrable spodumene lithium deposits within 1-2 kilmometres of the northwest boundary.
The geology along Litchfield’s western boundary is comparable to that prevalent at Finniss. With the potential for lithium pegmatite bodies to be apparent in the western zone of Litchfield, there is the possibility for contiguous mineralisation.
Litchfield Lithium Project.
CCZ’s primary and secondary targets at Litchfield were selected for their potential to host lithium-bearing pegmatites intruded within the Burrell Creek Formation.
A comprehensive surface sampling campaign has already been undertaken by the project’s current owners. Up to 600 soil and rock-chip samples are currently being analysed at a laboratory.
Assay results are due back shortly and will form a significant component of CCZ’s preliminary due diligence.
Picasso Lithium Project
The Picasso Lithium Project is in a well-known lithium producing region, which hosts the Mt Marion and Bald Hill lithium mines. These mines have JORC-compliant total resources at 71 million tonnes at 1.37% Li2O7 and 26 million tonnes at 0.96% Li2O8 respectively.
The project is approximately 50 kilometres from Norseman which connects via road/rail to Esperance Port.
Picasso is also close to LTR’s Buldania Lithium Project, circa 20 kilometres west, which has a JORC-compliant resource at 14.9 million tonnes at 0.97% Li2O9.
Outcropping and spodumene-related mineralisation at Buldania extends to the southeast under shallow cover along a 1.4-kilometre strike event that is open.
Picasso Lithium Project.
Picasso hosts geology that is comparable to LTR’s ground. Further to this, the Geological Survey of Western Australia (GSWA) has mapped granitic pegmatites (which typically host lithium-bearing minerals such as spodumene) within the Picasso Lithium Project.
Closer analysis and interpretation of GSWA’s maps suggest there are potentially more outcropping granite units and mapped pegmatites in the Picasso Project’s than proximal to the Bald Hill Lithium Mine.
Notably, the project was previously explored by Anglo Gold, which conducted aircore drilling that produced an assay showing elevated lithium levels up to 75ppm Li. 30ppm was deemed significant enough to warrant further investigation.
Acquisition terms
CCZ has been granted a 90-day option to acquire 100% of the Litchfield Lithium Project and Picasso Lithium Project.
The projects are owned by Lithium Technologies Pty Ltd and Lithium Supplies Pty Ltd: both companies have a 50% interest each in Synergy Prospecting Pty Ltd.
Under the terms of the option agreement, CCZ can exercise its right to acquire LT, LS and Synergy at anytime during the 90-day period.
Synergy’s primary assets are Litchfield and Picasso.
The terms of the 90-day option are as follows:
- A$50,000 non-refundable deposit in cash on formally granting the option that will go directly to Synergy for working capital purposes.
Upon exercising the option within the 90-day period, the binding consideration terms are as follows:
- A$1 million script payment in CCZ shares will become payable to the Vendor Group based on the 14-day WVAP calculated from the date of which the option agreement is announced to the ASX.
Note, the Vendor Group will be subject to a 6-month voluntary escrow period for 50% of the shares and 12-months for the 50% balance from the date of settlement. In addition, both parties agree to sign off on a binding term sheet.
Incremental consideration terms are applicable if the following milestones are achieved:
- A$1 million script payment in CCZ’s shares to the Vendor Group based on the 14-day WVAP if two drill-holes produce assayed intercepts greater or equal to a true width of at least 10 metres at 1.3% Li2O. Note, the two holes will be at least 100 metres apart, but not greater than 200 metres.
- A$1 million script payment in CCZ’s shares to the Vendor Group based on the 14-day WVAP if a JORC-compliant total inferred resource of at least 7 million tonnes at 1.3% Li2O is modelled by SRK Consulting.
- In the event of commercial mining operations commencing a 2% NSR will be payable to the nominees of the facilitator.
What’s next
The initial focus will be on the following areas:
- Commencement of due diligence on the Litchfield and Picasso lithium projects.
- For the Litchfield Lithium Project, return of assays for circa 600 surface samples.
In Queensland, the following is set to take place over the coming weeks:
- Commencement of drilling at the Arya Prospect.
- Return of all Big One Deposit assays from the laboratory, which will enable the geology team to interpret the results then formulate the next drilling campaign.
There are several ongoing steps for the Zambia operations, including:
- Complete the IP survey at the Luanshya & Mkushi projects then analyse the results for incremental targets for test-drilling; and
- Commence work on the inaugural drilling campaign for the Luanshya Project.