- Zenith Minerals (ZNC) is scrapping its joint venture deal with lithium explorer Bradda Head in exchange for a mix of cash and shares
- In the original JV deal, Bradda Head was earning a 55 per cent interest in Zenith's North American lithium project portfolio
- However, Zenith has now agreed to divest the projects and cancel the joint venture deal in return for US$250,000 (roughly A$322,000) and a 15 per cent interest in Bradda
- This interest is under a top-up right, meaning whenever new shares in Bradda are issued, Zenith will be given enough shares to keep its 15 per cent interest
- The deal lasts for two years or until Bradda commits to an initial public offering on a public securities exchange
- Zenith management said by divesting the lithium assets, the company can now focus more on its core gold and base metals assets in Queensland and WA
- Investors seemed mostly supportive of Zenith's decision, with ZNC shares closing 4.35 per cent higher at 12 cents per share
Zenith Minerals (ZNC) is scrapping its joint venture deal with lithium explorer Bradda Head in exchange for a share-cash offer.
The two companies initially had a deal under which Bradda Head would carry Zenith for US$5 million (around A$6.6 million) over three years to earn a 55 per cent interest in Zenith's lithium project portfolio in the U.S. and Mexico.
Today, however, Zenith has agreed to divest the projects completely and cancel the joint venture deal.
In return, Bradda has paid Zenith US$250,000 (roughly A$322,000) in cash and issued the ASX-lister 11.77 million Bradda shares, which represents a 15 per cent interest in the company.
This 15-per-cent interest is under what's known as a "top-up right", meaning whenever new shares in Bradda are issued, Zenith will receive enough shares to maintain its 15 per cent interest, free of charge.
This deal will last for two years or until Bradda commits to an initial public offering on a public securities exchange — whichever comes first.
Why the new deal?
Zenith management said today's transaction allows the company to focus on its core gold and copper projects around Australia.
These include the Red Mountain Gold Project and the Develin Creek Copper-Zinc Project in Queensland and the Split Rocks Gold Project in WA.
Zenith Chairman Peter Bird said the company refined its strategy in 2020 to focus more on gold and base metals as core commodities.
"In keeping with this, the current Australian domestic portfolio is starting to yield some very good results directly related to exploration expenditure," Peter said.
"As a consequence of this, a series of non-core commodities which require significant ongoing maintenance and expenditure in the value generation process have been either divested, dropped or joint ventured," he said.
"In the case of the United States Lithium Projects, we feel that the Bradda Head's plan to take this portfolio forward in return for a solid equity position (plus cash) is a good solution for both parties."
He stressed that though the arrangement with Bradda has changed, Zenith will remain exposed to the U.S. lithium projects through its interest in Bradda.
Bradda is currently planning a major drill campaign at the Wikieup lithium project in Arizona to define a maiden mineral resource. This drilling program is slated to begin in the June quarter of 2021, providing all necessary permits are received by Bradda.
Investors seemed mostly supportive of Zenith's decision to focus more on its core Australian projects, with ZNC shares closing 4.35 per cent higher at 12 cents per share.