Chinese take over PLZ in US$378m deal
A CHINESE resources outfit is to take over 87% shareholding in Prospect Lithium Zimbabwe (PLZ) in a deal worth nearly US$378 million, according to PLZ’s parent, Prospect Resources.
PLZ is the owner of Arcadia Lithium, a world-class asset on the outskirts of Harare, which recently attracted global attention after Prospect announced plans to sell its shareholding in the mine to give impetus to ongoing development.
e Shanghai-listed Chinese firm, Zhejiang Huayou, could ultimately pay up to US$422 million to assume full control of the operation if Zimbabwean investors in the project agree to relinquish their 13% shareholding in the business, according to a statement filed by Prospect on the Australia Stock Exchange (ASX).
However, the transaction is still subject to a series of regulatory approvals in Zimbabwe and China, although relations between the two countries mean that this could be a done deal. Zimbabwe has benefited from big Chinese investments in the past two decades, which have kept the southern African country running during a tough time when foreign direct investment plummeted in the aftermath of hardhitting western sanctions on the southern African country.
And it is likely that authorities on both sides would be prepared to work around the clock and iron out any hurdles that could stand in the way of the big transaction.
Prospect has been scouting for investors to give it impetus to advance the Arcadia operation, which has already produced its first samples.
“Prospect Resources Limited is pleased to advise that it has, through its 100%-owned subsidiary Prospect Minerals (PMPL), executed a binding share sale agreement with Huayou International Mining Limited, for the sale of its 87% shareholding in Prospect Lithium Zimbabwe (PLZ), owner of the Arcadia Lithium project in Zimbabwe. Huayou has agreed to purchase PMPL’s 87% shareholding in PLZ and associated intercompany loan for approximately US$377,8 million in upfront cash consideration, equating to approximately A$1,23 per Prospect ordinary share,” Prospect chief executive officer, Sam Hosack said yesterday.
“Huayou has also agreed with the other two shareholders of PLZ, Professor Kingston Kajese and the Tamari Trust, to acquire their shareholdings in PLZ, conditional on the transaction with Prospect completing. e entire Prospect team is delighted with this outcome. It is the culmination of a process that gained global traction and generated inbound interest amongst potential partners for the world-class Arcadia Lithium project. e Prospect board has undertaken a detailed evaluation of all proposals received through this competitive process. e 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. We look forward to working with Huayou and relevant stakeholders within the government of Zimbabwe to satisfy the conditions precedent, with a view to closing the transaction in late in Q1 (first quarter) or early in Q2 of 2022,” Hosack added.
Chen Xuehua, chairman of Huayou, commented: “Following a detailed due diligence process and significant engagement with Prospect in recent months, Huayou is very pleased to announce this transaction today. 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. e 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 is a leading Chinese new energy materials producer with three major business segments, which are research, development and production of cathode materials, research, development and production of battery precursor and development of battery metals resources.
The firm is listed on the Shanghai Stock Exchange with a market capitalisation of approximately US$22 billion.
“Huayou continues to execute on its proactive business development strategy to build a new energy materials business division, which includes the provision of significant investments in the lithium resources sector,” the firm said yesterday.
Huayou has been operating two copper and cobalt mines in the Democratic Republic of Congo since 2007 and is investing in four nickel and cobalt projects in Indonesia with an expected annual production of 255 kilo-tonnes (kt) of nickel and 20kt of cobalt contained in products by 2024.
Prospect is an ASX listed lithium company based in Perth, Australia, with operations in Zimbabwe. Prospect’s flagship asset is the Arcadia lithium project.
“Arcadia represents a globally significant hard rock lithium resource and is being rapidly advanced by Prospect’s experienced team,” said Prospect.