Firefinch (ASX:FFX) shares are up by 345% in past year, here’s why

March 28, 2022 06:07 PM AEDT | By Sonal Goyal

Firefinch (ASX:FFX) shares are up by 345% in past year, here’s why — Image source: © Milslav78 | Megapixl.com

What’s behind the Firefinch share price rally?

The ASX-listed lithium developer and gold miner, informed its shareholders that the company had satisfied all the conditions of Jiangxi Ganfeng Lithium Co. Ltd’s investment in the Goulamina Lithium Project.

In brief, the joint venture with Jiangxi has been formalised following the transfer of the Goulamina lithium project’s exploitations licences to Lithium du Mali SA (LMSA) (a subsidiary of joint venture company). Also, for finalising the joint venture agreement, Firefinch has secured a letter of no objection from the government of Mali.

Now, Ganfeng and Firefinch have 50% interest in the JV company.

What is a Joint Venture ?

After the finalisation of the JV agreement, the development funding package of US$170 million has been triggered. Ganfeng will provide equity funding of US$130 million to the JV company. This includes US$39 million from escrow, and US$91 million will be transferred to the JV company in the fews days. In addition to this, Ganfeng is obliged to either source US$64 million of 3rd party debt or provide US$40M of Ganfeng’s direct debt.

Demerger announced by Firefinch

Today, Firefinch said that the company would take forward the demerging of Goulamina into Leo Lithium Limited. With the approval from the Firefinch shareholders, Leo is expected to announce a pro-rata entitlement offer and get listed on the ASX.

Image source: © Hyperbiker | Megapixl.com

Management commentary

Michael Anderson, managing director at Firefinch, looks at the demerger and joint venture as a significant milestone.

Simon Hay, managing director at LEO, said on the development that,

Ganfeng’s vice chairman, Xiaoshen Wang commented that the joint venture has further strengthened the relationship with the Firefinch. Soon the partnership with Leo Lithium will also strengthen. Wang added that the Goulamina project carries global importance in the lithium supply chain.

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