Mineral Resources and Pilbara Minerals have resolved their offtake dispute for the Pilgangoora lithium project, with MinRes to surrender its entitlements in return for a $50 million stake in Pilbara.
Under the agreement, MinRes will relinquish its right of first refusal and 2.5 per cent royalty for lithium mined at Pilbara’s Pilgangoora project.
In exchange, Pilbara will issue $50 million worth of its shares to MinRes at 48 cents a share.
MinRes has agreed to retain its stake for at least six months, and not increase its holding for 12 months.
MinRes said it would support development of the Pilgangoora project, including being willing to provide mining and mine-related services to Pilbara for the lithium project, while exploring possible synergies with Pilgangoora and its adjacent Wodgina tantalum mine.
MinRes acquired the Wodgina mine from private group Global Advanced Metals in June, which also gave the company access to the first right of refusal over Pilgangoora offtake.
The deal will allow Pilbara to proceed with an offtake agreement with China-based General Lithium, with all court proceedings between Pilbara and MinRes to be immediately disbanded.
“Importantly, this means that the royalty, which formed part of the original terms for the acquisition of the underlying Pilgangoora tenements, has now been paid in full with no following obligations,” Pilbara managing director Ken Brinsden said.
“In addition, the right of refusal over existing and future offtake and product sales agreements for lithium has now been extinguished forever.
“This means that we can move ahead at full speed to complete our remaining offtake agreements, complete project permitting and financing and commence development of Pilgangoora as a world-class lithium project.”
MinRes managing director Christopher Ellison welcomed the agreement.
“The Wodgina-Pilgangoora area is recognised as the best hard rock, lithium address in the world and we are committed to working in collaboration with Pilbara Minerals to introduce world best technologies on the sites and become the lowest cost producer over the long term life of the mines,” he said.
“Mineral Resources has a proven track record as an outstanding mining services contractor and welcomes the opportunity to support Pilbara Minerals in the development and operation of the Pilgangoora tenements.
“We recognise that the Western Australia mining industry, working collaboratively, can compete successfully against the world’s best miners and this agreement shows the way for future joint project opportunities.”
Pilbara and MinRes shares were both locked in a trading halt today.