Australia-based Lithium Power International (LPI) has agreed to divest its wholly owned Australian subsidiary, Western Lithium (WLI), to critical minerals major Albemarle in an all cash-for-shares transaction worth A$30m ($20.64m)

According to the binding agreement, Albemarle’s Australian subsidiary Albemarle Lithium will acquire a 100% stake in WLI.

In exchange, LPI will receive A$29m at the completion of the transaction. The balance of A$1m will be received if certain tenement applications are granted within 18 months of the completion of the transaction.

LPI previously planned to spin out WLI into a new entity and subsequently list it on the Australian stock exchange.

However, as a result of “subdued capital market conditions” and an “attractive cash offer” from Albemarle that provided better value and less risk to shareholders, the board of LPI decided in favour of this deal instead of continuing with the spin-out.

LPI CEO Cristobal Garcia-Huidobro said: “This agreement with Albemarle provides LPI with immediate value for our Western Lithium subsidiary company. Despite the significant progress we had made towards an IPO of Western Lithium in the past months, this asset realisation will provide a significant uplift to the pre-money valuation of our Western Australia asset portfolio.

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“It will add significant cash to the company’s balance sheet and is non-dilutionary to LPI shareholders, as the financing process of our flagship Maricunga project in Chile continues moving forward.”

LPI expects the deal to allow it to focus on the development of the Maricunga lithium brine project in Chile.

The Maricunga lithium brine project is situated 170km north-east of Copiapó in Salar de Maricunga in the Atacama region of northern Chile.

According to the updated definitive feasibility study for stage one of the project, the Maricunga project can support a 15,200 tonnes per annum production of lithium carbonate equivalent over a mine life of 20 years.

In a press statement, LPI said: “This transaction provides significant non-dilutive balance sheet strength to support financing and offtake negotiations with international financing institutions.”

Completion of the deal is expected to take place on or around 3 July 2023.