CATL to invest C$8.5 million, representing an 8% equity stake in Neo Lithium
Investment will be by way of a Private Placement priced at $0.84 per common share
The investment results in further strengthening of the Company’s balance sheet with more than C$37M of cash post private placement
A Technical Committee will be formed to oversee the DFS and collaboratively determine the complete financing requirements for the 3Q Project
Investor Rights Agreement will provide CATL with board representation and pre-emptive rights
Neo Lithium (“Neo Lithium” or the “Company”) is pleased to announce that it has entered into an equity subscription agreement (the “Agreement“) with a subsidiary of Contemporary Amperex Technology (SZSE: 300750) (“CATL”), a Chinese battery manufacturer and technology company that specializes in the manufacturing of lithium-ion batteries for electric vehicles and energy storage systems, and battery management systems.
Under the terms of the Agreement, CATL will subscribe for 10,217,502 common shares (the “Common Shares“) of Neo Lithium at a price of C$0.84 per Common Share (the “Issue Price“) for gross proceeds to Neo Lithium of C$8,582,702. The completion of the transaction is subject to the approval of TSX Venture Exchange (the “Exchange“) and customary approval from the government of the People’s Republic of China. In addition, in order to demonstrate their on-going commitment to and belief in the Company and the 3Q Project, certain members of management and the board have committed to subscribe for up to 483,334 common shares of Neo Lithium for gross proceeds of C$406,000, at the same Issue Price (collectively with CATL’s subscription, the “Private Placement“).
This investment will strengthen Neo Lithium’s financial position and financing strategy and get us one step closer to the development and construction of the Company’s wholly owned Tres Quebradas Lithium Project (“3Q Project“) in Catamarca Province, Argentina. The Company completed a positive Pre-Feasibility Study in May 2019 and going forward, the Company together with the technical assistance of CATL, will finish the Definitive Feasibility Study (“DFS”) in order to define the precise financing requirements for the 3Q Project. The DFS will evaluate the economic feasibility for a project with a nameplate production capacity of approximately 20,000 metric tons of battery quality lithium carbonate, with expansion capacity up to 40,000 metric tons per year of battery quality lithium carbonate.
Waldo Perez, Chief Executive Officer and Director, commented, “We are delighted to receive an endorsement from a globally recognized, industry player such as CATL as we continue to further advance our strategic objectives at the 3Q Project. As we have said many times, we believe it’s extremely important to have a strategic partner with unique knowledge of the expected end market demand, before concluding the DFS. We are confident that CATL will help us define the battery grade quality and certification of the final product to highest levels.”
Changdong Li Representative of the Chairman in respect of resource procurement of CATL, commented, “CATL is very pleased to complete this strategic investment in Neo Lithium. We believe that the 3Q Project is an attractive development project that may benefit from our expertise and know-how in the battery manufacturing and technology space.“
Over the past few months, the Company has provided several corporate updates regarding the process to select a strategic and financing partner. Since then and recognizing that over the past months the pandemic has affected Project Financing activities globally in the lithium industry and others, the Company has decided to move forward with the DFS with the assistance of a global industry leader, which will help us minimize the technical risks and adapt the project to meet the best industry standards in terms of quality and specifications.
Constantine Karayannopoulos, Chairman of Neo Lithium commented, “We are thrilled to welcome CATL as a strategic investor in Neo Lithium and to have them join our share register alongside many of our other long-term supportive shareholders. The investment by CATL, which comes at a premium to market price, is a positive sign of support for the 3Q Project and our management team. CATL is a large and well respected leader in the battery space with extensive experience, which bodes extremely well as our team continues to forge ahead.”
Use of Proceeds & Further Information
Following this Private Placement, Neo Lithium will continue to fully control 100% of its offtake and the 3Q Project.
Neo Lithium intends to use the proceeds from the Private Placement for the following purposes:
- General working capital; strengthen the Company’s balance sheet and enhance its financial flexibility to provide support for the Company’s 3Q Project
- DFS; finance the remaining costs to finalize the DFS. Once the Technical Committee has been formed, the Company may incur in additional costs and expand the scope of the DFS
As part of the Private Placement, CATL has indicated its willingness to provide technical support in the certification of the final product and strategic expertise and financial support. In recognition of the strategic relationship, at the completion of the Private Placement the Company and CATL will enter into an Investor Rights Agreement pursuant to which CATL will be granted certain rights including:
- Board of Directors representation: CATL is entitled to nominate one non-executive director to Neo Lithium’s Board of Directors for so long as CATL continues to hold an interest in the Company of at least 8.0%, subject to certain dilution protections;
- Pre-emptive rights: CATL will have the right to participate in future equity offerings in order to maintain an 8% ownership (subject to certain dilution protections); and
- Technical Committee: CATL will have the right to nominate one person to the Technical Committee, to help oversee preparation of the final DFS that will be submitted to the Company’s Board of Directors
BofA Securities acted as financial advisor to Neo Lithium in connection with the Agreement and will continue working with the Company to complete the Company’s full funding requirements for the 3Q Project.
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