eBusiness Weekly
Tapiwanashe Mangwiro
Australian Stock Exchange- listed Prospect Resources that recently executed a binding Share Sale Agreement (SSA) with Huayou International Mining for the sale of its 87 percent shareholding in Prospect Lithium Zimbabwe, said they are ready to invest the proceeds in other similar investments.
The deal is valued at US$377.8 million in upfront cash consideration, equating to approximately A$1.23 per Prospect ordinary share. The transaction represents the culmination of the strategic partnership process undertaken by Prospect since August 2021.
However, with seven non-binding offers being made for the licence in November 2021, Prospect’s 87 percent stake in the asset was sold to Huayou Cobalt, the remaining 13 percent stake is held by a Prospect geologist (7 percent) and the land user upon which Arcadia is situated (6 percent).
According to Prospect’s managing director, Sam Hosack, the company also plans to distribute 95 percent of the sale proceeds to shareholders in the form of a capital return. Going forward, Prospect intends to use the proceeds of the Arcadia sale to pursue similar projects.
“We are proposing to retain about A$30-million to A$60-million to take the existing team and look at some of the other assets we have been working through to do a similar exercise to Arcadia again,” he says.
Being a lithium-focused business, Prospect entered Zimbabwe in early 2012 looking for gold and other opportunities.
“We are very much an exploration-focused business. With lithium becoming a very critical mineral, we went in earnest looking for lithium and discovered, and then drilled out Arcadia, which at that time was the fifth- or sixth-largest hard-rock lithium resource globally. It put Prospect on the map,” says Hosack.
“We know Zimbabwe and it is very prospective. Our team is mostly made up of Zimbabweans and we have a world-class team of Zimbabweans that live in Australia and have a really strong network and technical and geotechnical understanding of Zimbabwe in terms of the country’s geology and operations,” says Hosack.
Zimbabwe is also set to benefit from the sale, through the payment of capital gains tax on selling of the asset held.
From the gross sales of A$528m, we estimate the company will need to pay Zimbabwe capital gains tax of approximately US$30m, plus US$15m across transaction costs including legal and adviser fees and a damages fee on breaking its existing offtake.
“The transaction is also expected to complete in late first quarter or early second quarter of 2022, the company still expending on corporate expenses, likely exploration, and new projects development up until then.”
“In summary, we estimate Prospect will have approximately A$500m after deducting expenses and tax, and including cash prior to transaction announcement (ca A$23m) and from in-the-money options we expect to be mostly exercised (A$11m).”
