Ultra Lithium Inc told investors it has entered into a purchase, sale and joint venture (JV) agreement with Yahua International Investment and Development Co. to sell a 60% interest in its Georgia Lake and Forgan Lake properties to Yahua for C$8 million.
The company said Yahua will also make a strategic investment of C$5 million as part of a non-brokered private placement in which it plans to raise aggregate gross proceeds of up to C$7 million through the placement of 29.8 million units at $0.235 each.
"We are very pleased to enter this strategic partnership with Yahua as one of the major producers and suppliers of battery-grade lithium products in the world,” Ultra Lithium CEO Weiguo Lang said in a statement. “Yahua brings world-class expertise in the hard rock lithium space and a long-term perspective to the Company. Ultra Lithium looks forward to a robust exploration program for the hard rock lithium properties in Northern Ontario in 2022."
READ: Ultra Lithium wraps up acquisition of Forgan Lake lithium property in Ontario; provides corporate update
Under the terms of the agreement, Yahua will invest C$8 million to acquire a 60% interest in the wholly-owned subsidiary of Ultra Lithium which holds its Northern Ontario properties.
It will pay C$1 million within 15 working days after signing the agreement. A further C$1 million will be paid within five working days after the hard rock lithium exploration permits are placed into the subsidiary, with a further C$3 million payable within five working days after the transfer of the 60% equity interest in the subsidiary to Yahua is completed.
Yahua will also invest C$3 million into the JV company for exploration expenditures.
Under the terms of the agreement, Ultra Lithium will continue to pursue acquisition opportunities to increase high-quality hard-rock lithium resources with lithium-bearing pegmatites and continue to explore and discover more lithium resources in Canada for the JV.
Ultra Lithium noted that the board of directors of the JV will have five members, three of whom will be nominated by Yahua International and two by itself. The senior executives of the JV will be nominated and appointed by the board.
It said the two parties will retain their equity positions in the JV and prohibit dilution until the commencement of commercial production. International Lithium Corp (TSX-V:ILC). will also retain its 1.5% net smelter return (NSR) royalty on the Forgan Lake claims.
Private placement to raise up to C$7 million
Under the private placement, Ultra Lithium said each unit will comprise one common share and one half of one common share purchase warrant, with each whole warrant entitling the holder to purchase an additional share for C$0.30 for 12 months following the closing date of the offering.
It said the net proceeds from the sale of the units will be used to fund the exploration of its properties in Argentina, Ontario and Nevada and for general working capital purposes.
Yahua was founded in 1952 and is one of the earliest chemical companies established after the founding of the People's Republic of China. It currently has two main businesses in the lithium civil explosive industries. Yahua is a public company listed on the Shenzhen Stock Exchange with a market capitalization of approximately C$7 billion.
Based in Vancouver, Ultra Lithium holds a brine lithium property in Argentina, hard rock spodumene type lithium properties in northwestern Ontario, and a brine lithium property in the Big Smoky Valley, Nevada. The company also holds other gold and base metals properties in Argentina.
Contact the author at stephen.gunnion@proactiveinvestors.com