Desert Lion Energy has entered a binding offtake agreement with Chinese lepidolite converter Jiangxi Jinhui lithium which will see the company sell lithium concentrate from Phase 1 production of stockpiled material located on the company’s Rubicon and Helikon properties in Namibia exclusively to Jinhui.
Jinhui, based in Yinchuan, China, is a chemical converter that produces lithium carbonate and lithium hydroxide.
Under the terms of the agreement, Jinhui has agreed to purchase all lithium concentrate produced from the stockpiled material that contains not less than 2.0% lithium oxide (Li2O) and up to a maximum of 120 000 tonnes of lithium concentrate containing not less than 1.7% Li2O.
Management estimates that there are approximately 700 000 – 750 000 t of stockpiled material located on the Rubicon and Helikon properties that will produce approximately 150 000 – 160 000 t of lithium concentrate for sale to Jinhui under the agreement over the next 12 to 18 months.
Payment by Jinhui for each shipment of lithium concentrate, each in an approximate amount of 30 000 t, shall be collaterised by the delivery by Jinhui to Desert Lion Energy of irrevocable and unconditional letters of credit drawable on a major international bank.
On execution of the agreement, Jinhui made a deposit of US$4.5 million against future delivery of lithium concentrate, which depletes by an adjustment of the purchase price using a depletion factor of US$40.00 per tonne.
The purchase price for lithium concentrate is determined as of the first day of each month, for that month, calculated as a percentage of the previous 30 day moving average price of 99.5% lithium carbonate as published by Asian Metals (the Benchmark).
The percentage of the Benchmark is determined by the average lithium oxide and tantalum content of the lithium concentrate.
Where the company has not delivered the first shipment of material to the Port of Walvis Bay (FOB Port) on or before 16 April 2018, the deposit shall become due and owing, together with interest accruing thereon at the rate of 10% per annum until repaid in full.
Where Desert Lion Energy delivers the first shipment of material to the FOB Port on or before the deadline date, Jinhui shall have a period of 60 days to elect to subscribe for 15% of the common shares of the company for $13 million.
In consideration for the subscription, the company will enter into a five-year offtake agreement with Jinhui for Phase 2 lithium concentrate production produced by Desert Lion Energy from in-situ ore.
To support the sale of the Phase 1 lithium concentrates, Desert Lion Energy has installed and commissioned a sorting plant; in addition, the construction of the Phase 1 floatation plant is currently underway, with commissioning due to begin in early Q3 2018.
Upon completion, the Phase 1 floatation plant will be capable of processing approximately 350 000 – 400 000 tpa of feed.
“This offtake agreement and commencement of lithium concentrate production represents a significant milestone for the company and positions Desert Lion Energy as an emerging lithium producer,” comments Desert Lion Energy president and CEO Tim Johnston,
“We are in the early stages of building the next large-scale lithium mine in Namibia, we are confident that this relationship provides near-term value for shareholders, while positioning us for long-term organic growth,” he adds.