Cobalt refiner to buy Zim lithium project for US$422m

CHINA’S Zhejiang Huayou, the world’s biggest refiner of the battery metal cobalt, is to buy lithium developer Prospect Resources and creditor’s rights for a combined US$422 million. Prospect is developing the Arcadia lithium mine near Goromonzi, and has been on the hunt for new investors to advance the project.

Huayou will buy out Prospect, listed on the Australian Stock Exchange, pay creditors’ rights and buy out local minority shareholders.

The minority shareholders are 7% shareholder Tamari Trust, owned by veteran mining investor Paul Chimbodza, and Kingston Kajese, who holds 6%. The minorities will walk away with US$44,2 million for their combined 13% interest.

“The total amount of this transaction is US$422 million. After the completion of the acquisition, Huayou International Mining will hold 100% of Prospect Lithium Mining Company equity and related claims,” the company says.

The acquisition is still subject to approval by the governments of Zimbabwe and China, as well as Prospect Resources shareholders.

Huayou is listed on the Shanghai Stock Exchange and has assets of close to US$8 billion. The company made US$2,1 billion in revenue between January and June this year.

Prospect Resources this year opened bids for investors willing to fund the Arcadia project. The company said recently that it had received seven offers from “a range of international parties” willing to be involved in the project.

The Huayou offer was the best of the proposals evaluated, according to Prospect CEO Sam Hosack.

“The conclusion of this evaluation is that the Huayou proposal offers a highly attractive risk-adjusted proposition for Prospect shareholders, particularly when considered against the timing and execution risks attached to development and operation of the Arcadia Project either under Prospect’s ownership or in joint venture,” Hosack said.

Last year, Prospect signed a memorandum of understanding with Uranium One, the Canadabased unit of Russia’s Rosatom, opening talks for a possible deal by the Russian miner to buy over half of the lithium from Arcadia mine. Russia’s Renaissance Capital was appointed advisor on that transaction.

Huayou chairman Chen Xuehua said the acquisition is part of his company’s strategy to build its battery materials arm.

“We look forward to working with Prospect to complete the transaction and engaging with the Zimbabwean government ahead of planned development activities at Arcadia in the near-term.

“The acquisition of Arcadia complements our existing battery metal mining operations in southern Africa and represents a logical transaction for Huayou as we continue to build a new energy materials business division.”

Huayou has been looking at investing more in lithium projects overseas to add to its battery metal offering, a company executive was quoted as saying in September.

“We will pay more attention, not only in nickel and cobalt, but also lithium resources development, both inside China and outside of China,” George Fang said in a Reuters interview.

Huayou sources cobalt from the Democratic Republic of Congo, which supplies over 70% of the world’s cobalt. Recently, Huayou spent US$210 million on a stake in Chinese battery materials producer Tianjin B&M Science and Technology.

In June, Huayou announced it was spending US$1,2 billion in two new plants to produce raw materials for ternary power lithium batteries.

Sam Hosack, Prospect MD, said a direct optimised feasibility study showed improved economic returns from its planned 2,4 million tonne per annum capacity plant.

The study showed post-tax net present value and internal rate of return — which are both measures of a project’s viability — of US$929 million and 60% respectively.

On June 30, Prospect commissioned its pilot plant at Arcadia Mine and shipped out its first 25 tonnes of petalite in July.

Prospect Resources has signed a seven-year deal to supply petalite to Sibelco, the largest distributor of the metal in Europe and one of the world’s largest glass-ceramic manufacturers.

With the Sibelco deal, all of the petalite that Prospect will produce from Arcadia lithium mine in the first seven years now has guaranteed buyers.

In 2018, Hong Kong and Shenzhen-listed company, Sinomine, bought a stake in Prospect and agreed to buy up to 390 000 tonnes of spodumene concentrate and over one-million tonnes of petalite over seven-years.