Shares in Australian-based African lithium miner Leo Lithium (ASX:LLL) surged more than 17% on Monday after it revealed a $A106 million investment from Chinese giant Ganfeng.
Leo said it had entered into a binding agreement with a unit of China’s Ganfeng Lithium Group Co Ltd to raise A$106.1 million and to cooperate for the ramp-up of its Goulamina project in West Africa.
Ganfeng is China’s largest lithium producer and has links in Australia with a number of producers, such as Pilbara Minerals.
“The cooperation agreement encompasses a range of key strategic benefits to Leo Lithium, including a commitment to expand the capacity at Goulamina to 1mpta, a framework for further cooperation on a downstream conversion facility and other beneficial business opportunities,” Leo Lithium said in Monday’s statement.
The $106 million will be raised by the issue of 131 million new shares, representing 9.9% of Leo Lithium’s total pro-forma shares on issue.
At 81 cents a share, the issue was just 1 cent below Leo’s all-time high but that was lifted yesterday with a close at 85 cents (for a gain on the day of 17.24%). They touched a high of 86 cents intraday, pushing Leo’s market value above $800 million.
The cash injection will help finance Leo’s share of the development costs and other work to boost the size of the project.
Goulamina is due to start producing its first spodumene at an annual rate of 500,000 tonnes a year.
Should the latest deal get approval from Chinese authorities, Leo and Ganfeng will look to increase the size of the mine’s second phase to 500,000 tonnes a year, thereby boosting total output to a million tonnes by the end of the decade.
An offtake deal for its second stage has also been amended to include the potential development of a lithium hydroxide facility.
Ganfeng and Leo will look at a jointly owned conversion facility in Europe or another region close to West Africa.
There is, however, an intriguing backstory to this deal.
Back in September 2021, Ganfeng announced a $250 million plus deal for a 50% stake in the lithium project which was then controlled by Perth-based Firefinch Ltd.
The Financial Review reported that “The latest deal in the resurgent lithium sector will see Ganfeng provide $US130 million ($169 million) of equity funding and arrange debt funding of up to $US64 million in return for a half-share in Firefinch Limited’s Goulamina project in the West African nation of Mali.”
The deal with Firefinch went with the spinoff of its lithium interests into Leo Lithium in mid-2022.
In September 2022, Firefinch suspended its shares, announced the sudden exit of its managing director, and released a shocking operational update with problems at a gold mine and a capital raising that went nowhere.
Recent statements from Firefinch seem to indicate that no one wants to help finance its recovery.
Yesterday’s statement has made its 17% stake in Leo Lithium more valuable and in its March quarterly report in April, Firefinch said that if there are no proposals by next month, the 17% stake in Leo will be distributed to FireFinch shareholders.
Firefinch’s annual meeting is due to be held in Perth this Thursday – that could now have added interest.