The sale of ASX-listed lithium project development company Prospect Resources' 87% interest in the Arcadia project, in Zimbabwe, to a subsidiary of lithium-ion battery material producer Zhejiang Huayou Cobalt for $377.8-million has been finalised.
Following payment of $26.8-million in Zimbabwean capital gains tax and $8-million to Sinomine in relation to the termination of the offtake agreement between Prospect and Sinomine, Prospect received $342.9-million of the sales proceeds.
With existing cash and net transaction proceeds, Prospect expects to distribute A$440-million to A$450-million to its shareholders, equating to about A$0.94 a share to $0.96 a share, including up to a A$0.20 capital reduction.
“The transaction is the culmination of years of effort progressing and developing the Arcadia project to this point. It is a testament to the skills and expertise of the Prospect team, who are now firmly focused on the path ahead, to build the next iteration of Prospect as a developer of lithium and battery and electrification metals projects,” says Prospect MD and CEO Sam Hosack.
“We would like to thank Huayou for their professionalism throughout the Arcadia transaction. Huayou’s pedigree as a leading electric vehicle battery precursor producer opens up opportunities in Zimbabwe and supports our strategy both in Zimbabwe and the broader sub-Saharan region,” he says.
“Additionally, without the strong support and vision of the government of Zimbabwe, we would not have been able to complete this transaction, confirming that Zimbabwe is open for business and is a premier jurisdiction for the burgeoning lithium industry,” he adds.
Further, Prospect intends to distribute a substantial portion of the net proceeds from the transaction to its shareholders. The distribution will be a cash distribution, which will likely include a capital reduction component and an unfranked dividend component.
“Prospect is applying for an Australian Taxation Office ruling, which will set out the Australian tax treatment of the distribution for the main classes of Prospect’s shareholders. The capital reduction component of the distribution will require shareholder approval and a shareholder meeting is expected to be convened to seek that approval,” the company notes.
The payment of the proposed distribution is expected to occur not long after June 30, 2022, and Prospect intends to retain a cash balance of between A$30-million to A$40-million to progress battery and electrification metals projects, with a primary focus in Zimbabwe and secondary focus on the broader sub-Saharan African region, Hosack says.