The Leo Lithium Ltd (ASX: LLL) share price is charging higher on Thursday.
In morning trade, the lithium developer's shares are up 8% to 53.5 cents.
Why is the Leo Lithium share price jumping?
Investors have been buying the company's shares this morning after it announced the execution of an agreement with Ganfeng Lithium.
According to the release, Leo Lithium and Ganfeng Lithium have signed a binding agreement that implements a previously announced investment structure.
Under the agreement, Ganfeng Lithium will solely fund US$137.2 million of the capital costs for the Goulamina project in Mali via direct cash injection. This will see Ganfeng Lithium earn an additional 5% interest in the project, bringing its ownership to 55% and reducing Leo Lithium's to 45%.
In addition, Leo Lithium has commenced the drawdown of its US$40m Ganfeng debt facility, which was put in place in July 2022 to fund the Goulamina joint venture.
The sum of the above is that the Goulamina joint venture is now fully funded through to its first production. After which, Leo Lithium will be responsible for 45% of all remaining ongoing costs.
The release notes that the equity investment amount of US$137m is equivalent to A$0.81 per share, which is a big premium to the current Leo Lithium share price.
In addition, Leo Lithium remains operator and manager of the Goulamina joint venture and retains customary minority shareholder protections. However, Ganfeng has agreed to assist with those pesky Mali Government relations.
'Important milestone'
Leo Lithium Managing Director, Simon Hay, commented:
We are extremely pleased to have executed the Equity Investment Agreement with Ganfeng, which cements our solid relationship with China's largest lithium producer, and the direct project investment is set to facilitate regulatory approvals in China. Our Cooperation Agreement is meant to deliver a range of key strategic benefits, including a commitment to expand the capacity at Goulamina Stage 2, as well as a framework for further cooperation on a downstream conversion facility and other business opportunities.
Satisfaction of all the conditions precedent to the Ganfeng debt facility is an important milestone with drawdown of funds now underway. We look forward to continuing to build on our strong relationship with Ganfeng and deliver value with our Goulamina project.
