Portuguese energy group Galp Energia has signed a heads of agreement (HoA) with Savannah Resources for strategic investment and alliance in the lithium field around the Mina do Barroso Lithium Project in northern Portugal.

With this deal, oil and gas firm Galp has entered into the field of lithium exploration.

Through this deal, Galp intends to secure a 10% stake in Savannah’s Portuguese subsidiaries that own Mina do Barroso lithium mine for $6.4m cash.

This amount will be used to advance Savannah’s progress towards its definitive feasibility study (DFS), subject to due diligence and completion of definitive agreements with regard to the partnership.

With this agreement, Galp is expected to add material value through its participation at the project’s board level and provide its experience in developing large scale resource projects in Portugal.

The two firms are set to analyse, under exclusive terms, an offtake agreement for up to 100,000tpa of lithium concentrate from Mina do Barroso, which equals around 50% of annual production.

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By GlobalData

This deal is claimed to mark a step in commercialising Mina do Barroso and “will be an important factor” in securing financing for the project construction.

Savannah’s CEO David Archer said: “We are delighted to announce Galp as a potential investor and future strategic partner in our Portuguese project. We believe Mina do Barroso’s low carbon footprint lithium concentrate will provide a key foundation for Europe’s energy transition to electric mobility and we are delighted to be joined by Galp on this journey.”

Archer added further: “The prospect of having Galp as a partner in Portugal is even more enticing given their outstanding ESG credentials, having been named by the Climate Disclosure Project as one of the energy companies that most effectively enacts climate change-related best practices. This record is a result of Galp aligning its portfolio with low-emission business models, products and services and we are pleased that they have recognised Savannah as a partner with similar objectives.”

Currently, Portugal is the largest lithium producer in Europe.

Its mining firms sell lithium mostly to the ceramics industry and are only now starting to produce higher-grade lithium for use in electric cars and electronic appliances, reported Reuters.

Rich in lithium, Barroso is a mountainous region and considered as world heritage site for agriculture in 2018.

Portuguese firm Lusorecursos also holds a mining licence in Borroso region.