Andrada Mining (LSE:ATM,OTCQB:ATMTF) said on Sunday (September 8) that it has entered into a strategic partnership with major lithium producer SQM (NYSE:SQM) to develop its Lithium Ridge asset in Namibia.
Located in Namibia’s Erongo region, Lithium Ridge covers about 3,300 hectares and is about 35 kilometers from Andrada’s Uis mine, where it started lithium concentrate production last year at a pilot plant.
The agreement, which is subject to approval from the Namibian Competition Commission, involves a three stage earn-in structure where SQM will finance exploration and development activities for a potential 50 percent stake in Grace Simba Investments (GSI), a segment of Andrada that now holds the license for Lithium Ridge.
Under the terms of the earn-in agreement, SQM will pay Andrada an initial US$2 million split into two tranches. Following on from that, the lithium miner has an option to invest US$20 million over three stages.
In the first phase, SQM will be able to invest US$7 million in exploration over 18 months, earning a 30 percent stake in GSI. An additional US$13 million in funding over 24 months will secure SQM a 40 percent stake during the second phase.
If the Lithium Ridge project proceeds to a definitive feasibility study, or incurs a total development cost of US$40 million, SQM will be eligible to earn up to a 50 percent interest in GSI.
Andrada will manage and operate Lithium Ridge during the earn-in period, with supervision from a joint development committee. The committee will include members from both Andrada and SQM, ensuring collaborative decisions.
As project manager, Andrada will steer leading operations during the earn-in period, while SQM’s financial contributions will provide the necessary capital to move the project forward. The agreement also contains a contingent success fee, which stipulates that should Andrada declare a mineral resource of more than 40 million metric tons during the third phase of the earn-in period, SQM will pay a sum calculated based on the lithium oxide content of the declared resource.
Andrada CEO Anthony Viljoen described SQM as the ‘perfect partner’ for unlocking the value of Lithium Ridge.
“The introduction of a substantial player in the global lithium market will also place Namibia at the forefront of the African lithium development trajectory and unlock value for the Namibian mining industry,” he commented.
The Lithium Ridge is pending regulatory approval, but is expected to proceed. To date, exploration at the site has uncovered mineralization along a strike length of 6 kilometers, with lithium grades of up to 2.13 percent lithium oxide.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.