Firefinch debuts Leo Lithium as future Goulamina operator amid Ganfeng agreement execution

The Mali-focused gold miner and lithium developer is set to spin out its Goulamina asset with an ASX debutant as it finalises its joint venture agreement with Ganfeng Lithium Co.

The spinout will enable the company to focus on its gold production and exploration assets.

Firefinch Ltd (ASX:FFX) is set to put a future ASX-lister in charge of its lithium portfolio after it executed a suite of full-form legal agreements to progress its Goulamina project joint venture with lithium titan Ganfeng.

Leo Lithium Limited is poised to list on the local share market next year and take control of the southern Mali project, which is primed to reach first production in 2023.

As It prepares for Leo’s ASX debut, the Mali-focused gold miner and lithium developer is finalising its deal with Ganfeng — a key step towards completing the Goulamina joint venture transaction, which could be worth upwards of US$190 million.

Both parties have also agreed to expedited a final investment decision (FID), targeting completion in the coming quarter ahead of Leo Lithium’s demerger in the March quarter next year.

“Another significant milestone”

Commenting on today’s news, Firefinch managing director Dr Michael Anderson said: “Another significant milestone has been achieved in progressing Goulamina toward construction and production.

“Formal documentation has been completed, and satisfaction of the remaining conditions precedent to completing the US$194 million Ganfeng deal is well underway.

“In consultation with our partner Ganfeng, we have also agreed to bring forward FID to the end of this year.

“Off the back of a positive final investment decision, we will be in a very strong position to demerge Goulamina into a dynamic new ASX-listed lithium player, Leo Lithium, and list in early 2022.

“All Firefinch shareholders will receive a pro-rata entitlement to Leo Lithium shares, together with the opportunity to increase their interest, should they wish, under a planned entitlement offer.

“On completion of the entitlement offer and listing, Leo Lithium is expected to have a fully funded interest in a global scale lithium development with pre-production engineering underway and imminent commencement of construction.

“Firefinch will be aligned with its shareholders as it intends to retain up to 20% of Leo Lithium and will support Leo Lithium in building operational capability and a world-class management team.”

Leo Lithium- next global lithium producer

As it prepares to spin out its lithium portfolio, Firefinch has appointed Leo Lithium to handle the Goulamina asset after its ASX debut early next year.

On listing, Leo Lithium is expected to be a leader in the ASX lithium landscape, with Goulamina to be the next large scale global lithium hard rock project to enter production and the first of its kind in West Africa.

The lithium asset also carries a partnership with the world’s largest lithium chemicals producer, which has committed to taking up to 100% of the spodumene concentrate produced from Goulamina.

Finally, the project is substantially funded to production, involving total funding commitments of up to US$194 million.

Prior to Leo’s listing, Goulamina is expected to have reached FID and commenced engineering and preliminary works.

In an ASX announcement on Monday, Firefinch stated: “The name Leo was chosen as the lion is an iconic African animal, commonly referred to as “King of the Beasts”, and known for demonstrating strength, authority and fierce pride loyalty – fitting for a company run for its shareholders.

“The components of lion, li-ion and the connection to Africa, are very appropriate for a company with a world-class Malian lithium asset.

“Sundiata Kieta, the founder of the Malian empire in the 13th century, was known as the Lion of Mali.”

The demerger

Firefinch intends to demerge Leo and the Goulamina asset, with shareholder approval, in the March quarter of 2022, although this timeline rests on the completion of the joint venture transaction and achieving the FID.

Once the demerger goes ahead, Firefinch shareholders will receive a pro-rata entitlement of shares in Leo Lithium by way of an in-specie distribution (at no cost).

Leo Lithium is also anticipated to raise additional capital via an entitlement offer to existing shareholders in parallel with its application for listing.

The entitlement ratio, the pricing and quantum of the entitlement offer will be determined closer to the date of the demerger.

To support the ASX newcomer, Firefinch will provide a range of management and operational services, including support in Mali, for a transitional period after completion of the demerger until Leo Lithium has independently developed its own capabilities.

Firefinch is also intending to retain up to a 20% interest in the spinout.

In preparation, the company has commenced a formal process to recruit senior executives and an independent board to lead Leo Lithium and Goulamina into its next chapter.

Execution of Ganfeng agreements

Firefinch has also executed full-form legal agreements to advance its joint venture (JV) transaction with Ganfeng.

These include the subscription, shareholders’, offtake and management agreements, among others.

To obtain a 50% interest in the JV, Ganfeng will provide up to US$194 million in funding, comprising US$130 million in equity over two instalments, and by arranging up to US$64 million in debt to construct the project and take it into production.

Executed documentation will now be provided to the relevant authorities to seek Chinese regulatory approvals, which are expected to take up to three months.

Once conditions precedent are satisified, Ganfeng will provide the first instalment of US$39 million by way of equity investment into the JV, anticipated next quarter.

Ganfeng vice-chairman Xiaoshen Wang commented: “We are delighted to move forward in our partnership with Firefinch at Goulamina.

“We are especially pleased to accelerate the process to achieve FID and look forward to bringing Goulamina to production as soon as possible.”

Expedited FID for Goulamina

Under the terms of the JV, Ganfeng is obliged to contribute the second equity investment of US$91 million within 10 business days of Goulamina FID.

Since announcing the transaction, Firefinch and Ganfeng have appointed Lycopodium (ASX:LYL) to update the project’s October 2020 definitive feasibility study (DFS), which will support the FID.

In light of the prevailing strong lithium market conditions, Firefinch and Ganfeng have agreed to expedite the FID and now hope to complete the updated DFS and FID in the December quarter.

The early completion of the FID also means Ganfeng will provide the second cash investment of US$91 million and arrange debt funding of up to US$64 million earlier than initially expected.