16/07/2015 - 13:09

Neometals secures backing for lithium mine

16/07/2015 - 13:09

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Australia is likely to emerge as the clear leader in global lithium production after Perth companies Neometals and Mineral Resources today announced an offtake and funding agreement with a Chinese producer for the planned Mt Marion mine.

Neometals secures backing for lithium mine
Neometals managing director Chris Reed.

Australia is likely to emerge as the clear leader in global lithium production after Perth companies Neometals and Mineral Resources today announced an offtake and funding agreement with a Chinese producer for the planned Mt Marion mine.

Australia’s production of lithium was around 13,000 tonnes in 2014, closely followed by Chile with 12,800t, with analysts expecting there will be dramatically increased demand for the metal in the coming decade thanks to renewable energy innovations.

Most of that production is from the Talison Lithium mine at Greenbushes, but the Mt Marion mine will produce around 5,500t annually.

The deal will pave the way for the company’s potential move downstream, with Business News recently reporting Neometals company managing director Chris Reed was touting opportunities in domestic lithium processing.

The offtake agreement was signed with Chinese lithium producer Jiangxi Ganfeng Lithium, that nation’s second largest, and values the project at around $80 million.

Ganfeng will acquire 25 per cent of Neometals’ subsidiary Reed Industrial Minerals, which controls the project, for $19.5 million while Mineral Resources, which jointly owns Reed, will retain 30 per cent control.

MinRes and Ganfeng will hold options to increase their shareholdings to 43.1 per cent each late next year.

Additionally, MinRes will build, own and operate mining, crushing and beneficiation infrastructure, and Ganfeng will offtake 100 per cent of the company’s production at market prices.

From the fourth year of the agreement, Neometals will be able to take half of the production under certain circumstances.

Mr Reed said the final investment decision would be triggered when the contract was executed, expected to be at the end of August.

“The site has been cleared, we’re connected to the power line,” he said.

The construction period will be around 10 months.

Neometals was up 5 per cent to 10 cents per share at the time of writing.

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