Chariot lines up China-backed Nigerian lithium offtake deal

The share price of Chariot Resources surged as much as 39 per cent to a high of 6.8 cents after the company signed a term sheet with a subsidiary of Chinese supply-chain goliath Xiamen C&D Inc. for a proposed partner-funded drilling, trial-mining and direct-shipping-ore, or “DSO”, offtake program at one of its Nigerian lithium projects.

The deal, struck with C&D (Hainan) Co., Ltd., Hong Kong ZhongNuo Energy and C&C Minerals Ltd., could provide a powerful, low-capital pathway for Chariot to fast-track exploration and potentially generate early cashflow from its newly acquired West African ground.

The scale of the proposed partnership adds serious heft to the venture. Xiamen C&D is a Fortune Global 500 company which reported an eye-watering RMB671.27 billion (A$140B) in operating revenue last year and total assets of RMB733.12 billion (A$153B). Its energy and chemicals business already handles nearly 1.9 million tonnes of lithium-battery raw materials annually, suggesting this deal is far more a strategic supply-chain path than a pure exploration play.

Under the proposed structure, ZhongNuo would fund and conduct a minimum 1500-metre diamond drilling program and subject to satisfactory results, it would then fund and operate a potential trial-mining campaign capped at 240,000 tonnes of DSO. ZhongNuo says it has Nigerian mining capability and access to existing processing infrastructure, including an under-utilised 500,000-tonne feed-capacity plant strategically located just 150 kilometres north of Chariot’s ground.

C&D would act as the offtake buyer for all qualifying DSO delivered during the Phase 1 term, with pricing linked to the Shanghai Metals Market’s benchmark for battery-grade lithium carbonate. The deal includes a price floor of US$150 (A$211) per dry metric tonne, below which neither party is obliged to transact. 

Lithium DSO pricing varies considerably by grade; however, a useful reference point came recently when fellow ASX-listed Core Lithium sold lithium fines at a base price of US$290 (A$408) per tonne. Revenue from the operation is proposed to flow through a Singaporean marketing office and will be split between Chariot, ZhongNuo and the company's Nigerian partners.

The parties have agreed to a 90-day exclusivity period to conduct site reviews, select a single project from Chariot’s portfolio and negotiate a definitive agreement. As a sign of its commitment, C&D has paid Chariot a refundable US$100,000 (A$140,600) exclusivity fee.

If the parties proceed to a definitive agreement, C&D will provide Chariot with a US$500,000 (A$703,000) interest-free prepayment, which would be amortised against future DSO sales invoices.

The proposed deal comes as Nigeria looks to carve out a bigger role in the global battery supply chain. The country is actively shifting towards boosting domestic processing capabilities and recently opened a new US$250 million (A$351,5M) Chinese-built lithium processing plant, signalling a national ambition to move beyond simply exporting raw ore.

The commercial terms of the deal remain subject to due diligence, the signing of definitive agreements and the formal completion of Chariot’s underlying acquisition of the Nigerian portfolio. The acquisition covers four project clusters – Fonlo, Gbugbu, Iganna and Saki – spanning an estimated area of 257 square kilometres.

The region is known for its relatively recent history of artisanal lithium mining since around 2014, when informal miners hand-picked and sold raw pegmatite ores containing spodumene to foreign buyers - primarily targeting Chinese markets - with this commercial activity intensifying significantly in 2021.

Chariot Resources executive chair and managing director Shanthar Pathmanathan, said: “The Term Sheet provides a structured pathway to evaluate one project from our Nigerian portfolio with proposed partner funding for drilling and potential trial mining, together with a market-linked offtake pathway through C&D. The phased structure is important: the parties must first complete site reviews, diligence and drilling, and the commercial program would proceed only if definitive agreements are executed and all conditions are satisfied."

The deal also provides C&D and ZhongNuo with a joint right of first refusal over potential subsequent mining phases at the selected project.

For Chariot, the proposal could be a smart corporate development in which the company has potentially engineered a way to explore and drill some of its Nigerian ground and bring it into small-scale production with a minimal upfront cash burn, courtesy of its deep-pocketed partners.

While the main commercial terms are not yet binding, securing a partnership with the globally respected calibre of Xiamen C&D is a significant vote of confidence in the potential of Chariot’s Nigerian assets. With its partners potentially funding the initial stages of exploration and trial mining, Chariot has effectively identified a low-cost pathway to what could be another leg up for Nigeria’s emergence as a serious lithium player.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au