eBusiness Weekly
Golden Sibanda Senior Business Reporter
Australia Stock Exchange listed lithium developer, Prospect Resources, has signed a Memorandum of Understanding (MOU) with Belgian industrial minerals blue-chip firm Sibelco, for the offtake of ultra-low iron petalite product from its Arcadia Mine in Zimbabwe.
Demand for ultra-low iron lithium, also used in ceramics industry, is anticipated to grow exponentially as electric vehicles become more common and affordable globally, driving growth in worldwide demand for the cars, as is the case at the moment with internal combustion engines (ICE).
As such, the latest MOU will provide an exclusive period of time for the parties to negotiate and execute a binding offtake agreement for Arcadia’s ultra-low iron petalite product.
The two companies have roughly a month and a half to negotiate the terms of the offtake agreement, with the MoU slating the signing of the potential agreement for June 1, 2020.
While the deal will come with its own terms, the nature of an offtake agreement means Sibelco could be set up as a guaranteed buyer for Arcadia petalite.
Generally, offtake agreements are set up before production even begins to specify a purchase price of the product and the date of delivery.
In Prospect and Sibelco’s case, it means later can agree to buy any future production from Arcadia at a specified price.
Prospect executive chairman Hugh Warner said Sibelco is a significant “blue-chip” customer, touting its annual turnover of around €3,5 billion.
“Sibelco is the largest distributor of ultra-low iron petalite in Europe and possibly the world,” Hugh said.
“Once in production, Prospect will be the largest ultra-low iron petalite producer in the world,” he said.
According to Prospect, the two companies have agreed to not deal with any other party in relation to the supply of ultra-low iron petalite.
However, Prospect pointed out that the MoU does not mean the company needs to stop its discussions with Uranium One Group, with whom Prospect has also signed an MoU.
Whilst Prospect and Sibelco have agreed not to deal with any other party in relation to the supply of ultra-low iron petalite, nothing in the MOU prohibits Prospect from continuing discussions with the Uranium One Group on another offtake MoU.
Warner said; “I am pleased to announce that we have signed an MOU with Sibelco for Arcadia’s premium ultra-low iron petalite.
“Sibelco is the largest distributor of ultra-low iron petalite in Europe and possibly the world. Once in production, Prospect will be the largest ultra-low iron petalite producer in the world.”
Sibelco was founded in 1872, initially supplying silica sand from deposits in Flanders to Belgium’s major glass producers.
Sibelco is operating 174 production sites in more than 30 countries with a team of over 8 500 people.
Sibelco’s main products are silica, high purity quartz and speciality minerals such as petalite.
Prospect had an existing MOU signed with Uranium One to allow for a 90-day exclusivity period (subject to certain exceptions).
The agreement provides for Uranium One to complete a due diligence on the Prospect and its Arcadia Lithium Mine near Harare.
Subject to satisfactory due diligence, Uranium will negotiate equity investment terms in Prospect or its subsidiaries; and off-take terms for at least 51 percent of the company’s future lithium production.
Uranium One is a global energy company and one of the world’s largest uranium producers, with a diverse portfolio of assets worldwide, including in Kazakhstan, the United States and Tanzania.
Zimbabwe is the world’s fifth largest producer of lithium, with only a single producing mine, Bikita Minerals, but could move higher the rankings once four other new developing projects, including Arcadia, come on stream.
Because of its strategic importance, the Arcadia lithium project has already been accorded Special Economic Zone Status (SEZ), rendering it available to a number of special incentives that will catalyse its progress.
Arcadia comes as existing global supply can only meet growing demand up to the year 2021 and for producers to meet the demand from the market in 2022; development of additional capacity would need to commence 2019.
As such, without further investment in new lithium extraction projects, there will be a supply shortage by 2022, when demand for electric cars will accelerate as they reach cost parity with internal combustion engine (ICE) vehicles.
Zimbabwe’s lithium deposits are second to none in Africa, and proven deposits are located in Bikita, Goromonzi, and Kamativi.
