Core Lithium Ltd (ASX:CXO) (OTCMKTS:CORX) has signed an option agreement to acquire six granted mineral leases containing more than 30 lithium pegmatite targets adjacent to its 100%-owned Finniss Lithium Project near Darwin in the Northern Territory.
The aim is to complete the acquisition of these assets in 2021 and, based on a positive assessment, to increase mineral resources and potentially increase Finniss project life-of-mine.
This plan would also support future lithium production capacity increases and downstream processing.
Potential to accelerate resource expansion
Core Lithium managing director Stephen Biggins said it was a significant milestone in the company’s history.
“This new acquisition of multiple pegmatite mines adjacent to the Finniss Lithium Project has the potential to significantly accelerate Core’s resource expansion plans.
“The expected increases in resources from this deal and our well-funded resource drill programs at Finniss this year should provide a strong platform for extending and expanding production of lithium from the project as lithium prices increase.
“Spodumene and lithium chemical prices have increased over 50% from lows in 2020, and as Australia’s most advanced lithium developer, Core is right at the front of the line of new lithium production in Australia.”
History of tin and tantalum mining
These granted mining leases all have a history of tin and tantalum mining from pegmatites with similar chemistry as the high-grade spodumene pegmatites on Core’s adjacent Finniss Lithium Project tenements.
The Leviathan and Annie groups of pegmatites, which are the subject of the transaction, were discovered in the 1880s and then mined for tin and tantalum intermittently for more than 100 years.
The granted mining leases, subject of an Option Deed, include over 30 pegmatites mined previously for tin and tantalum, including:
➢ Centurion Pegmatite
- 43 metres downhole spodumene pegmatite drill intersection and over 270 metres long; and
- Assays over 1% lithium oxide within 25 metres of the surface
➢ Leviathan Pegmatite
- Three pegmatites 30-40 metres total width and 350 metres long.
➢ Northern Reward Pegmatite
- Strike length of 800 metres and up to 18 metres true width.
➢ Bilatos Pegmatite
- Large footprint of 300 metres x 100 metres - but has not yet been drill tested.
Building on this previous pegmatite mining and drilling information, Core will be the first company to explore and drill these prospective, lithium-rich pegmatite systems for economic spodumene lithium mineralisation.
Terms of agreement
Core Lithium, through its wholly-owned subsidiary Bynoe Lithium Pty Ltd, has entered into a Call Option Deed with Outback Metals Proprietary Ltd and Victory Polymetallic Pty Ltd to potentially acquire the six mineral leases.
Under the terms of the option, Bynoe will pay Outback and Victory $500,000 cash for the option to acquire the Mineral Titles.
Bynoe has until December 31, 2021, to exercise its call option and may extend that date by three months until March 31, 2022, and a further three months until June 30, 2022, subject to paying $250,000 cash for each extension.
During the Call Option period:
- Bynoe is granted an exclusive irrevocable licence and right to access and conduct exploration and land access assessment activities on the Mineral Titles at its own cost and risk; and
- title to the Mineral Titles remains with Outback and Victory.
Party to call option deed
Australia New Zealand Resources Corporation Pty Ltd, owns the land underlying two of the mineral titles and is also a party to the call option deed and agrees to enter into a covenant on exercise of the call option.
Bynoe must pay $25,000 per annum to the landowners as compensation and is to provide an additional $50,000 on signing the call option deed in the form of cash or a bank guarantee as a security deposit for rehabilitation liabilities.
Completion of call option
If Bynoe (or its nominee) exercises and completes the call option transaction, the $50,000 will be returned or netted off the purchase price.
The landowner cannot deal with the underlying freehold during the call option period unless the third party taking an interest agrees to be bound by the terms of the call option, including the requirement to enter into the covenant.
Bynoe can withdraw from the arrangement at any time and the call option will terminate at the end of the call option period if it has not been exercised.
Exercise of option
If Bynoe exercises the option, subject to securing the appropriate authorisations, it must pay:
➢ $5 million to Outback and Victory, with $1.5 million to be paid in cash and the balance of $3.5 million to be paid in cash or CXO shares, at Core’s discretion (subject to any shareholder approval otherwise the balance of consideration will be cash). Any shares will be subject to a four-month and 14-day escrow period.
➢ Contingent consideration will also be payable of $500,000 to the Outback and Victory ($150,000 in cash and $350,000 in cash or CXO shares, at Core’s discretion, for each 1 million tonne JORC resource Bynoe discovers, capped at an aggregate amount of $5 million. Any shares will be subject to a three-month and 14-day escrow period.
Completion is conditional on Bynoe securing ministerial approval within six months after the call option exercise date.
If ministerial approval is not obtained, then Bynoe can elect to terminate and the consideration will not become payable.
If the call option is exercised, the landowners must enter into a Covenant in Gross with Bynoe, which runs with and binds that part of the land which underlies the two Mineral Titles.
Under the terms of the covenant, the landowners agree to give Bynoe a right of first refusal to purchase the underlying land if the landowner intends to sell the land, and otherwise undertakes to ensure any third-party purchaser is bound by the covenant.
Under the covenant Bynoe agrees to pay compensation to the landowner in full and final satisfaction for any damage, disturbance, and loss of access to the land including as compensation under the Mineral Titles Act:
➢ $500 per hectare per annum to the Landowner, for any part of the landowner's underlying land that is subject to the Mineral Titles. Bynoe must pay this compensation until the mine development date and reaching a final investment decision; or it purchases the underlying land from the landowner). No compensation will be payable if Bynoe does not undertake mining activities on the affected Mineral Titles in any 12-month period.
➢ $1,900,000 (Indexed using Darwin CPI) to the landowner, on the Mine Development Date.
Core guarantees the financial obligations of Bynoe under the call option deed and the covenant.