European Lithium Ltd (ASX:EUR) is set to potentially acquire two Ukrainian lithium assets through its deal to buy Petro Consulting LLC from Millstone and Company Global DW LLC.
If the acquisition completes, EUR aims to become the first and largest local producer of lithium hydroxide in Europe.
The acquisition will be satisfied with the issue of A$20 million worth of EUR shares plus A$50 million in performance shares.
Petro Consulting’s two Ukrainian projects are Shevchenkivske and Dobra, which are considered underexplored by modern exploration methods and contain significant exploration targets based on historical data.
The acquisition is conditional upon Petro Consulting being issued the relevant special permits for the extraction and production of lithium, EUR shareholder approval paving the way for Millstone to acquire more than 20% of EUR, and certain other conditions.
The end date for completion is 12 months from signing.
Further, Millstone has agreed to invest A$20 million in EUR, with A$2.5 million immediately, A$2.5 million subject to shareholder approval to be sought at the forthcoming annual general meeting (AGM) and A$15 million conditional upon completion of the acquisition of Petro Consulting.
This is in recognition of the mutual synergies through combining the Ukraine projects with EUR’s advanced Wolfsberg Lithium Project, confidence that Petro Consulting will be issued special permits and to fund further exploration and pre-feasibility and feasibility studies on the Ukraine projects.
Largest local lithium hydroxide producer in Europe
EUR executive chairman Tony Sage said: “I’m very excited about the opportunity to potentially purchase these Ukrainian lithium assets to add to our advanced Wolfsberg Lithium Project.”
“If the acquisition completes, we aim to become the first and largest local producer of lithium hydroxide in Europe.”
Millstone founder Mykhailo Zhernov added: “We see many natural synergies between the lithium projects; the major one is spodumene (the mineral explored both in Wolfsberg and the Ukrainian projects).
“We have the same basic material which is one of the most common and technologically developed for battery-grade lithium production in the world.
“EUR has the relevant expertise in turning spodumene ore into lithium hydroxide and the Ukrainian spodumene deposits can provide necessary resource base extension.
“Moreover an opportunity exists to share any future Wolfsberg processing plant for the spodumene concentrate produced in Ukraine, minimising CAPEX and improving economic feasibility, subject to successful completion of the PFS and DFS stages.
“Our belief in European Lithium to develop the joint largest spodumene lithium projects in Europe is supported by our investment for completing the DFS for the Wolfsberg Lithium Project, as well as bringing the Ukrainian lithium deposits through JORC compliant resource confirmation and completion of a DFS.”
Shevchenkivske exploration target
The Shevchenkivske project has an exploration target ranging from 11.0 to 14.0 million tonnes at 1.2 to 1.3 % lithium oxide.
The exploration target has been derived from historical foreign estimation works conducted involving computer-based 3D interpretation of drill hole data resulting in the generation of wireframe models of the mineralized pegmatite.
These models were interpolated with drill hole grade data using an inverse distance method.
Dobra exploration target
The Dobra Project has an exploration target ranging from 80 to 105 million tonnes at 1.1% to 1.4% lithium oxide.
Works planned to test these exploration targets will involve a program of twinned drilling over the project areas for comparison against historical data and collection of core for structural, geotechnical and metallurgical analysis.
Providing the original data is deemed acceptable, it will be used in conjunction with new data to create maiden JORC-compliant resource estimates for each area.
This work is expected to be funded with money raised as part of the transaction and is anticipated to begin during the fourth quarter of 2022.
Drilling, assaying, interpretation and estimation is expected to take up to a year for completion.
The parties have 12 months to satisfy the conditions, failing which the acquisition and the $15 million balance of the placement will not proceed.
Under the terms of the Petro purchase, EUR will issue Millstone:
? A$20 million in fully paid ordinary shares, at an issue price of the greater of 80% of the 20 day VWAP immediately prior to completion under the SPA and A$0.095; and
?50 million performance shares, each with a face value of A$1. The performance shares convert to ordinary shares at an issue price of the greater of the 20 day VWAP immediately prior to the relevant conversion event and $0.095 upon certain performance hurdles being met within the specified period.
The material terms of the four-tranche share subscription are as follows:
? The first tranche of A$2.5 million at an issue price of A$0.095 will be completed immediately without shareholder approval using the company’s remaining capacity under Listing Rule 7.1.
? The second tranche of A$2.5 million, also at an issue price of A$0.095 is subject to EUR shareholder approval;
? The third tranche of A$5 million at an issue price of A$0.095 is subject to EUR shareholder approval and completing the acquisition of Petro Consulting, with the issue to occur 20 business days thereafter; and
? The fourth tranche of A$10 million, for a number of shares equal to the lesser of (i) 105,263,158 shares and (ii) the number calculated on the basis of an issue price of the greater of 80% of the 20 day VWAP and A$0.095, is subject to EUR shareholder approval and completing the acquisition of Petro Consulting, with the issue to occur 30 days thereafter.
Use of funds
EUR will use funds from the first and second tranche on the definitive feasibility study for EUR’s Wolfsberg project, and funds from the third and fourth tranche for Petro Consulting’s Ukrainian projects.
Millstone representative Mykhailo Zhernov will be appointed to EUR’s board upon completing the first tranche of the placement, with a further director to be appointed following acquiring Petro Consulting.
Zhernov has a track record of 20 years in the financial sector of Ukraine, CIS, Central and Eastern Europe.
He currently serves as the managing partner at Millstone & Co Investment Company, a private investment company specialising in investment, asset and capital management in Central and Eastern Europe.