Rio Tinto has struck a farm-in deal with junior Charger Metals to potentially earn a major stake in its lithium development project in the Goldfields.
Rio Tinto has struck a farm-in deal with junior miner Charger Metals to potentially earn a major stake in its lithium development project in the Goldfields.
Charger Metals signed a binding farm-in agreement with Rio Tinto's exploration subsidiary for its Lake Johnston lithium development project in the Yilgarn.
It follows mining heavyweight Mineral Resources' $60 million deal for the lithium and base metal rights at Pantoro’s Norseman gold project in the Goldfields.
ASX-listed Charger simultaneously signed a deal to pay $2 million for Lithium Australia’s 30 per cent interest in the Lake Johnston project to take full ownership of the asset, subject to approvals.
Under the deal, Rio will pay Charger $500,000 and invest $1.2 million prior to the commencement of the farm-in, and spend a minimum of $3 million on exploration expenditure in the first 12 months.
Further, Rio can earn a 51 per cent interest by sole funding $10 million worth of exploration and paying $1.5 million in cash, or it can earn 75 per cent by funding $40 million worth of exploration activities and competing a definitive feasibility study.
Charger chairman Adrian Griffin said Rio could potentially spend $42.5 million under the agreement to earn a 75 per cent interest in the asset.
“The largely unexplored Lake Johnston Greenstone belt now hosts multiple spodumene discoveries, and with the recent focus and increasing exploration activities [it] could evolve into a prominent lithium province,” he said.
Meanwhile, the completion of Lithium Australia and Charger’s acquisition deal is subject to shareholders approval at an upcoming meeting.
Lithium Australia will retain first right of refusal for offtake for up to 30 per cent of lithium produced by the Lake Johnston project for future commercial production of lithium ferro phosphate.
“As a significant shareholder of Charger, we are excited by the partnership between Rio Tinto and Charger and believe this provides a win-win outcome for all,” Lithium Aus managing director Simon Linge said.
Charger Metals shares fell following the announcement by 27.6 per cent to trade at 27.5 cents at 1PM AWST.