Why the Essential Metals (ASX:ESS) share price is surging 8% today

Lithium demand is forecast to remain strong amid increased battery production.

| More on:
green arrow representing a rise in the share price

Image source: Getty Images

The Essential Metals Ltd (ASX: ESS) share price is off to the races, up 8.11% in afternoon trade to 20 cents per share.

Below, we take a look at the asset sale announcement from the ASX lithium and gold explorer that looks to be driving investor interest.

What asset sale was reported?

The Essential Metals share price is rocketing after the company reported it will divest its 51% interest in the Mavis Lake Lithium Project, located in Canada.

Essential Metals’ Joint Venture partner International Lithium Corporation, is also divesting its interest, giving 100% of the project to Critical Resources Ltd (ASX: CRR) under an Option Agreement. The Critical Resources share price is up 12.90% at time of writing.

According to the release, the divestment will realise $1.6 million in cash and shares, along with $1.5 million in cash that’s linked to certain milestones for Essential.

Critical Resources will pay $175,000 for the right to acquire 100% of the Mavis Lake Lithium Project. If it elects to go through with the deal, it will pay $1.5 million in cash and 68 million in Critical Resources shares, valued at 2.2 cents per share. That’s significantly below the current 3.6 cents per share.

Essential Metals and International Lithium Corporation will share the proceeds equally.

Additionally, the Essential Metals share price could be getting a lift from the report that milestone payments totalling $3 million may be received subject to the definition of a lithium resource at the project.

Commenting on the divestment, Essential Metals’ managing director, Tim Spencer said:

The strong interest in lithium has allowed Essential and ILC to monetize an early-stage, non-core asset on favourable terms. Retaining upside exposure via a shareholding in Critical Resources means we will benefit from any success the Critical Resources team has in advancing Mavis Lake.

We will continue to focus our efforts on the company’s first-class West Australian lithium and gold projects.

Spencer said rapidly advancing the company’s Pioneer Dome Lithium Project in Western Australia’s Eastern Goldfields was the highest priority.

Essential Metals share price snapshot

The Essential Metals share price is up an impressive 150% year-to-date. By comparison the All Ordinaries Index (ASX: XAO) has gained 12% so far in 2021.

Over the past month, Essential Metals shares have lost 9%.

Should you invest $1,000 in Essential Metals right now?

Before you consider Essential Metals, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Essential Metals wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

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.

More on Resources Shares