Leo Lithium's Strategic Sale of MLBV and Shareholder Returns
LLL (LLL) Share Update July 2024 Thursday 25th
Leo Lithium Announces Shareholder Returns from MLBV Sale
Leo Lithium Limited (ASX:LLL) has announced a major update regarding its proposed sale of a 40% interest in Mali Lithium BV (MLBV) to GFL International Co., Ltd (Ganfeng) for US$342.7 million. This strategic move is expected to result in substantial returns for shareholders.
Instant Summary:
- Sale of remaining 40% interest in MLBV for US$342.7 million.
- First cash distribution to shareholders planned for January 2025.
- Second cash distribution to shareholders planned for July 2025.
- Approval needed at the Annual General Meeting on 31 July 2024.
- Plans for cost reductions and headcount reduction underway.
Details of the Proposed Sale
Leo Lithium Limited has entered into a Share Sale Agreement (SPA) to sell its remaining 40% interest in Mali Lithium BV (MLBV), which includes its entire remaining interest in the Goulamina Lithium Project, to GFL International Co., Ltd (Ganfeng) for US$342.7 million (~A$519 million). This transaction was initially announced on 8 May 2024.
Shareholder approval at the Annual General Meeting scheduled for 31 July 2024 is a condition precedent to the transaction. Following discussions with shareholders, the Board has committed to increasing the amounts returned to shareholders.
Shareholder Returns
The cash consideration under the SPA will be received in three parts: a non-refundable deposit of US$10.5 million (already received), Tranche 1 of US$161.0 million payable on completion expected by 31 October 2024, and Tranche 2 of US$171.2 million payable by 30 June 2025.
Leo Lithium plans two cash distributions to shareholders. The first distribution, planned for January 2025, will include the net proceeds from Tranche 1 and the non-refundable deposit, potentially increasing the distribution to A$0.15-0.18 per share. The second distribution, planned for July 2025, will depend on whether the company identifies value-accretive investment opportunities.
Cost Reductions and Operational Changes
Leo Lithium has also announced plans for cost reductions, including headcount reduction and a review of the Board's size and remuneration. These changes aim to align the company's operational scale with similar-sized companies and reduce operating costs in 2025.
The company will focus on monetizing the Trailing Product Sales Fee and facilitating funds distribution to shareholders.
Engagement with ASX
Leo Lithium continues to engage with the ASX to resolve concerns regarding compliance with ASX Listing Rules 12.1 and 12.5. The ASX has indicated that it is not minded to reinstate Leo Lithium shares to trading following the release of the Notice of Meeting.
Important Dates
Key dates include the shareholder meeting on 31 July 2024, the expected completion of the transaction by the end of October 2024, and the planned cash distributions in January and July 2025.
The sale of MLBV and the planned shareholder returns are likely to have a positive impact on Leo Lithium's stock. The significant cash distributions will likely boost investor confidence and attract new investments. However, the company's ability to identify value-accretive opportunities and resolve ASX compliance issues will be crucial for long-term success.
Investor Reaction:
Investors have responded positively to the news of substantial cash distributions. Analysts believe that the strategic sale and focus on shareholder returns will enhance Leo Lithium's market position. However, there is some concern about the company's future investment opportunities and ASX compliance.
Conclusion:
Leo Lithium's strategic sale of its interest in MLBV and the planned shareholder returns represent a significant move for the company. Investors should closely monitor the upcoming shareholder meeting and the company's efforts to resolve ASX compliance issues. The planned cash distributions provide a strong incentive for current and potential investors.