ASX-listed iron ore miner, Strike Resources will spin out its South American lithium assets into a new company, Lithium Energy after successfully completing a $9 million IPO of 45 million shares. Lithium Energy hopes to list on the ASX later this month and will emerge from the process with a theoretical market capitalisation of about $16 million at the $0.20 IPO issue price.
The new company’s asset portfolio of former Strike projects features the Solaroz lithium project in Argentina.
Solaroz boasts 120 square kilometres of lithium mineral concessions within the Salar de Olaroz Basin in South America’s “lithium triangle” in north-west Argentina.
Strike says Solaroz sits adjacent to or predominantly surrounded by mineral concessions being developed into production by ASX and TSX-listed Orocobre Ltd and Lithium Americas Corporation.
The Salar de Olaroz Basin also hosts the producing Salar de Olaroz lithium brine operation run by Orocobre and its joint venture partner, Toyota Tsusho Corporation.
According to Strike, the Solaroz terrain is considered to be highly prospective for containing commercial quantities and concentrations of lithium-rich liquid brine.
The company says it believes the aquifer that supplies the brines being extracted by Orocobre is likely to extend under Lithium Energy’s Solaroz concessions.
Argentina has the world’s largest lithium brine resources and is currently the world’s third largest producer of lithium, after Australia and Chile.
One of the key attractions of lithium brine projects in Argentina is their low cost of production compared with hard-rock lithium projects, according to Strike.
The company says Argentinian and Chilean lithium brine projects are well recognised as being the lowest on the lithium carbonate production cost curve.
Once pumped to the surface, typically from aquifers at up to several hundred metres in depth, the lithium-rich brines are then transferred to large evaporation ponds, which simply rely on energy from the sun and local atmospheric conditions to concentrate the brine and evaporate the liquids.
There are generally no tailings or toxic by-products involved and brines are generally considered to be very cost effective versus hard-rock lithium mining and refining.
Very limited rainfall combined with dry, windy conditions combine to provide the ideal environment for the brine-evaporation process, Strike says.
The company’s strategic move looks to be on the money, given recent renewed demand for lithium and mergers and acquisitions in the sector, including the planned $4 billion merger between Lithium Energy’s neighbour, Orocobre and ASX-listed Galaxy Resources.
Strike says its Lithium Energy spin-out will create a “battery minerals” outfit whose priority will be on the exploration and potential development of the Solaroz lithium project, enabling Strike to focus on its iron ore assets in the Pilbara that are nearing production in addition to its assets in Peru.
At completion of the spin-out, Strike will speak for 34.4 million Lithium Energy shares of the new company’s issued capital that will comprise 80 million shares in total, equating to a 43 per cent shareholding.
Lithium Energy will also assume ownership of Strike’s Burke high-grade graphite deposit in Queensland.
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