Firefinch (ASX:FFX) share price lifts on lithium update

Demand for lithium is forecast to remain strong amid the global electrification push.

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The Firefinch Ltd (ASX: FFX) share price is edging higher in early trade, up 1%.

Below we take a look at the ASX lithium share’s project update and the latest on its demerger plans.

Firefinch share price lifts on lithium expansion plans

The Firefinch share price is in the green this morning after the company reported it had formed a joint venture (JV) to develop the Goulamina Lithium Project, located in Mali.

The JV with Chinese company, Jiangxi Ganfeng Lithium (Ganfeng), will see Ganfeng pitch in US$130 million (AU$173 million) in cash as well as securing up to US$64 million in debt.

The JV remains subject to various conditions precedent, but has received Chinese regulatory approvals and support from Mali’s government.

The new partners plan to start a major 2-year drilling campaign. The US$6 million program will drill some 50 kilometres, with the aim of lifting reserves and resources to “rank Goulamina even higher among the largest global lithium projects”.

The company expects the new drill campaign will support a 23-year mine life at a higher rate of production. Its Definitive Feasibility Study (DFS) update is considering a 75% increase in production capacity. That would take production from 2.3 million to 4 million tonnes per year in a phase 2 expansion.

Demerger update

The Firefinch share price could also be getting a boost following this morning’s update on its demerger plans for Leo Lithium Pty Ltd. According to the release, once the demerger is complete, Leo will be a standalone company with a 50% interest in the JV with Ganfeng.

Leo Lithium aims to be listed on the ASX by the end of the March 2022 quarter. A shareholder meeting to vote on the demerger is slated for February.

Under the existing proposal, Firefinch would hold on up to 20% of Leo shares post demerger. Eligible Firefinch shareholders will receive an in-specie distribution of Leo shares at no cost.

What did management say?

Commenting on the progress, Firefinch’s managing director, Michael Anderson said:

Considerable progress has been made advancing Goulamina over the past few months. The key takeaway is that following the proposed demerger in 2022, Goulamina will be substantially funded, with engineering and procurement well progressed and 50km of drilling already underway.

Importantly, Goulamina will be on a quick path to production, expected in 2023, and in an enviable position to take advantage of prevailing very strong lithium market conditions.

Firefinch share price snapshot

The Firefinch share price is up an eye-popping 253% year-to-date. By comparison the All Ordinaries Index (ASX: XAO) is up 11% so far in 2021.

Over the past month Firefinch shares have gained 10%.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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