Charger Metals NL (ASX: CHR) shares are taking a bit of a hammering on Monday.
At the time of writing, the ASX lithium stock is down over 22% to 29.5 cents.
This is despite the company announcing a major deal with Rio Tinto Ltd (ASX: RIO).
What's going on with this ASX lithium stock today?
This morning, Charger revealed that it has entered into a binding agreement with Lithium Australia Ltd (ASX: LIT) to purchase its minority interest in the Lake Johnston Lithium Project in Western Australia for $2 million. This increases Charger's interest in the project to 100%.
However, it has immediately given Rio Tinto the rights to earn a 75% ownership in the project via a farm-in agreement.
According to the release, the mining giant's subsidiary, Rio Tinto Exploration (RTX), will pay the ASX lithium stock $500,000 and invest $1.2 million prior to commencement of the farm-in. It will also spend a minimum of $3 million on exploration expenditure over the first 12 months.
After which, RTX can earn 51% by sole funding $10 million in exploration expenditure and paying Charger a further $1.5 million.
Finally, RTX will then be able to take its ownership to 75% interest by sole funding a further $30 million in exploration expenditure or completing a Definitive Feasibility Study (DFS).
Management believes that the RTX deal reaffirms the prospectivity of the Lake Johnston Lithium Project and its potential to host a large-scale lithium deposit. Though, it's a shame the ASX lithium stock will only ultimately have a minority stake in it.
Nevertheless, Charger's managing director, Aidan Platel, was pleased with the deal. He commented:
The Rio Tinto Exploration farm-in agreement is an excellent result for Charger and its shareholders and reaffirms our belief that the Lake Johnston Project has potential to host a large-scale lithium deposit. The planned significant investment by RTX will allow thorough systematic exploration over all of the project tenure, with initial exploration focused on fast-tracking the Medcalf Spodumene Prospect as well as progressing the Mt Day and Mt Gordon lithium prospects.
