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Zenith Minerals Limited (ASX:ZNC) shoots up 22% on lithium partnership, non-EV metal assets to be demerged

Highlights 

  • Zenith and the Saudi Arabian EVM have teamed to explore lithium at the Split Rocks and Waratah Well projects in Western Australia.
  • EVM may earn a 60% stake in the Waratah Well and Split Rocks lithium projects by solely funding the feasibility study of the projects in next 24 months.
  • Other non-EV metal projects, including gold and base metal assets under ZNC’s banner, are planned to be demerged to one of more new companies which would be listed on the ASX.
  • Zenith has secured AU$6-million funding from EVM as per which, EVM or its nominee will subscribe 20,000,000 ordinary shares at AU$0.30 a share.

Shares of Zenith Minerals Limited (ASX:ZNC) jumped 22.41% after Thursday’s announcement of a new joint venture with EV Metals Group (EVM). Zenith and the Saudi Arabian EVM have teamed to explore lithium at the Split Rocks and Waratah Well projects in Western Australia.

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Lithium JV to fast-track Waratah Well and Split Rocks on development path

Under the joint venture (JV), EVM may earn a 60% stake in the Waratah Well and Split Rocks lithium projects by solely funding the feasibility study of the projects in next 24 months. Currently, Zenith owns 100% interest in both the lithium projects. Upon the completion of the feasibility study within the 24-month timeframe, EVM will gain 60% interest in the projects while the remaining 40% interest would be retained by Zenith.

Project locations of the ZNC-EVM Joint Venture Source; ZNC company announcement 13 January 2022

The partnership not only de-risks existing lithium projects substantially but also gives the cohort the confidence to lead new battery metals opportunities across Australia. Currently, EVM, which aspired to be a global leader in battery chemicals and technology, is conducting a front-end engineering and design (FEED) for the world’s first integrated Battery Chemicals Complex in Saudi Arabia. Furthermore, the concerned parties have agreed to assess additional lithium and EV metal opportunities across Australia, subject to the commercial appropriation of the same.

Must Read: A bird’s eye view of Zenith Minerals’ (ASX:ZNC) progress across its project portfolio

The completion of a successful feasibility study would require exploration drilling, metallurgical testwork, geotechnical studies, metallurgical testwork, resource estimation, mining studies, environmental studies, permitting and financing to be concluded within the timeline. The JV activities are expected to commence shortly with planning for the drilling program already underway for the Waratah Well and Split Rocks projects.

EVM will be required to invest a minimum of AU$7 million towards the exploration of the Split Rocks or Waratah Well projects or any new mutually decided project within 24 months. EVM would be required to solely secure and invest towards expenses related to the development, construction and commissioning of mining projects (including Zenith’s share).

Suggested Read: Zenith Minerals (ASX:ZNC) gears up for drilling at Waratah Well project

Zenith would be required to repay its proportionate share of the project cost along with interests from its share of the proportionate share of revenues earned from the minerals produced. Each of the partners will enjoy a non-exclusive right to bring new additional projects into the joint venture to explore lithium or EV metals.

Demerger of Non-EV metal assets to new ASX-listed entities

The partnership allows Zenith to focus on EV metals opportunities. Other non-EV metal projects, including gold and base metal assets under ZNC’s banner, are planned to be demerged to one of new companies which would be listed on the ASX. The demerger will be conditional upon the approval of the ZNC Board, shareholders, the ASX, the ASIC and other regulatory authorities along with tax advice favourable to the Company.

Fundraising

Zenith has secured AU$6 million funding from EVM as per which, EVM or its nominee will subscribe 20,000,000 ordinary shares at AU$0.30 a share, 20% higher than the 10-day VWAP. The shares will be issued under ZNC’s ASXLR 7.1A placement capacity on or about Monday, 17 January 2022.

The funds will be utilised towards –

  • The assessment and acquisition of new lithium/EV metal opportunities up to AU$6 million.
  • The advancement of gold and base metals portfolio in short term or funds for the new demerged entity holding assets of AU$2 to AU$4 million.
  • Working capital requirements which include financing legal and administrative expenses of the gold and base metal assets estimated to be around AU$1 million.

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