Lithium Energy Ltd. has received the second deposit of US$6 million in cash for the sale of its interest in the Solaroz Lithium Brine Project in Argentina.
This has been received from CNGR Netherlands New Energy Technology B.V. (CNNET), a subsidiary of Shenzhen Stock Exchange-listed CNGR Advanced Material Co. Ltd.
It follows a general meeting held on January 15, 2025, at which Lithium Energy shareholders voted overwhelmingly in favour of an amended sale agreement with ~96% of votes cast approving the sale.
As a result, the sale of the company’s interest in the Solaroz Project to CNGR is now unconditional.
Background
On April 26, 2024, Lithium Energy entered into a share sale agreement with CNNET in respect of the sale of its 90% interest in Argentinian company, Solaroz S.A. for consideration totalling US$63 million (~A$97 million) cash, which includes the assignment of a loan owed by Solaroz to Lithium Energy.
On December 3, 2024, Lithium Energy and CNNET entered into a deed of amendment and restatement which amends and restates the original sale agreement.
This deed was conditional only on Lithium Energy obtaining shareholder approval for the amended agreement under Listing Rule 11.2., which has now been granted.
Under the terms of the amended agreement, the total cash purchase price of US$63 million remains unchanged but completion of the Solaroz sale will now occur in two tranches:
- Tranche 1 – comprising the transfer of a 39.9% shareholding in Solaroz (with Lithium Energy retaining a 50.1% shareholding) and the assignment of a US$12 million (~A$18.5 million) loan amount, to be completed on April 24, 2025; and
- Tranche 2 – comprising the transfer of the 50.1% balance of Lithium Energy’s shareholding in Solaroz and the assignment of the balance of the outstanding loan amount, to be completed on January 9, 2026.
CNNET will be entitled to nominate one representative to the Solaroz board upon the completion of Tranche 1, however, the Solaroz board will continue to comprise a majority of Lithium Energy representatives, until the completion of Tranche 2.
Consideration
The purchase price will be paid as follows:
- The US$1.8 million (A$2.713 million) first deposit previously paid upon execution of the original sale agreement (received in May 2024) is now fully non-refundable, immediately upon execution of the amended agreement. Previously, it was refundable if the original agreement was terminated and completion did not occur for any reason);
- A second deposit of US$6 million (~A$9.2 million) which has been received following shareholder approval. This is refundable on termination of the amended agreement only in limited circumstances relating to the insolvency of Lithium Energy and breach of Lithium Energy’s warranties having a material adverse effect of more than US$5 million (~A$7.7 million).
- US$26 million (A$40 million) (Tranche 1 amount) payable on the Tranche 1 completion date of April 24, 2025;
- US$21.7 million (~A$33.4 million) (Tranche 2 amount) payable on the Tranche 2 completion date of January 9, 2026;
- US$3 million (~A$4.6 million) to be transferred to a joint escrow account on the Tranche 2 completion date and held for the benefit of Lithium Energy and CNNET for a period of one year, to serve as security for Lithium Energy’s performance under the amended agreement, after which it will be released to Lithium Energy (on January 8, 2027); and
- US$4.5 million (~A$6.9 million payable if the Benchmark Lithium Carbonate Price exceeds US$23,000/tonne averaged over any 4-month period beginning from the Tranche 1 completion date and ending 12 months after the Tranche 2 completion date.
Additionally, Lithium Energy has secured an up to US$15 million (A$23.1 million) commitment from CNNET to fund as loans to Solaroz the development of the Solaroz Project from January 1, 2025, under the amended agreement.
Exploration phases
Lithium Energy and CNNET, through Solaroz, will undertake the next phases of exploration and evaluation at the project utilising the CNNET loan after securing updated Environmental Impact Assessment approvals in respect of the Solaroz Project concessions, which will include the following work:
- additional (including infill) drill holes are planned in the Central Block to improve the confidence in correlation of lithology, porosity and brine concentration between holes in the Central Block;
- drilling is planned to further evaluate the Northern Block;
- Large-diameter wells are planned to be drilled and installed on target areas for pump testing;
- hydrological studies will be undertaken to support groundwater modelling to define lithium brine extraction rates; and
- process test work (equivalent to metallurgical test work) will be undertaken on relevant lithium brine samples.