Queensland Pacific Metals Ltd (ASX:QPM) (FRA:4EA) has entered into a binding agreement with LG Energy Solution (LGES) and POSCO GEM 1ST FUND for a combined equity investment of US$15 million with shares up as much as 24%.
The company has also entered into binding offtake agreements for the sale of 10,000 tonnes contained nickel and 1,000 tonnes contained cobalt from its TECH Project with LGES and POSCO.
QPM managing director Stephen Grocott said: “We warmly welcome LG Energy Solution and POSCO as shareholders to Queensland Pacific Metals and look forward to the day where the TECH Project becomes a significant supplier of nickel and cobalt to each company.
“The ability for QPM to attract and establish business relationships with companies of the calibre of LG Energy Solution and POSCO is validation for our company and what we are trying to achieve with the TECH Project.
“We have developed excellent relationships with LG Energy Solution and POSCO and look forward to building on these for years to come.”
Investors have responded positively with shares as much as 24% higher to 18.5 cents, a new high of almost 13 years while QPM's market cap was approximately $171.5 million at the start of trading.
LGES will invest US$10.5 million (99,235,889 QPM shares) and POSCO will invest US$4.5 million (42,529,667 shares) and shares will be issued at a price of A$0.1364 - a premium of 16.8% to the 1-month VWAP of QPM shares.
Post completion of the transaction, the ownership interest of LGES and POSCO in the company will be 7.5% and 3.2%, respectively – while LGES and POSCO will be subject to a 12-month escrow on their shares.
Funds received from the equity investment will be used to advance the TECH Project, including bringing forward detailed design work which will facilitate earlier placement of long-lead time plant and equipment.
POSCO head of LiB Materials Business Office Seokmo Chung said: “We are delighted to co-invest with LG Energy Solution in Queensland Pacific Metals.
“We look forward to building our relationship with QPM and assess other business opportunities that may arise between QPM and POSCO.
The equity investment is conditional upon QPM shareholder approval with a notice of meeting for an Extraordinary General Meeting to be sent out shortly.
The key terms of the offtake agreements.
The execution of the offtake agreements is a major milestone with LGES and POSCO both highly credible and bankable counterparties, which will significantly assist QPM’s ability to fund the TECH Project.
Their combined offtake quantities will account for the majority of production at the TECH Project, giving QPM the baseload customers it needs to underpin development.
Initially, nickel and cobalt will be supplied to LGES and POSCO in the form of mixed hydroxide precipitate (MHP), until QPM completes a commercial production certification process for the TECH Project.
This certification process is expected to take 9 to 12 months and once completed, all sales will be in the form of nickel sulphate and cobalt sulphate.
LGES Global SCM Center leader Dongsoo Kim said: “This is the most meaningful investment in our supply chain for LG Energy Solution since the company spun out from LG Chem.
“We believe the TECH Project will deliver sustainable nickel and cobalt production that is in line with LGES’ operating philosophy.
“And our proactive investments in the supply chain such as this will ultimately play a role in further satisfying our customers.”