Chariot lines up China-backed Nigerian lithium offtake deal

The share price of Chariot Resources surged as much as 39 per cent to a high of 6.8 cents after the company signed a term sheet with a subsidiary of Chinese supply-chain goliath Xiamen C&D Inc. for a proposed partner-funded drilling, trial-mining and direct-shipping-ore, or “DSO”, offtake program at one of its Nigerian lithium projects.

The deal, struck with C&D (Hainan) Co., Ltd., Hong Kong ZhongNuo Energy and C&C Minerals Ltd., could provide a powerful, low-capital pathway for Chariot to fast-track exploration and potentially generate early cashflow from its newly acquired West African ground.

The scale of the proposed partnership adds serious heft to the venture. Xiamen C&D is a Fortune Global 500 company which reported an eye-watering RMB671.27 billion (A$140B) in operating revenue last year and total assets of RMB733.12 billion (A$153B). Its energy and chemicals business already handles nearly 1.9 million tonnes of lithium-battery raw materials annually, suggesting this deal is far more a strategic supply-chain path than a pure exploration play.

Under the proposed structure, ZhongNuo would fund and conduct a minimum 1500-metre diamond drilling program and subject to satisfactory results, it would then fund and operate a potential trial-mining campaign capped at 240,000 tonnes of DSO. ZhongNuo says it has Nigerian mining capability and access to existing processing infrastructure, including an under-utilised 500,000-tonne feed-capacity plant strategically located just 150 kilometres north of Chariot’s ground.

C&D would act as the offtake buyer for all qualifying DSO delivered during the phase one term, with pricing linked to the Shanghai Metals Market’s benchmark for battery-grade lithium carbonate. The deal includes a price floor of US$150 (A$211) per dry metric tonne, below which neither party is obliged to transact.

Lithium DSO pricing varies considerably by grade; however, a useful reference point came recently when fellow ASX-listed Core Lithium sold lithium fines at a base price of US$290 (A$408) per tonne. Revenue from the operation is proposed to flow through a Singaporean marketing office and will be split between Chariot, ZhongNuo and the company’s Nigerian partners.

The parties have agreed to a 90-day exclusivity period to conduct site reviews, select a single project from Chariot’s portfolio and negotiate a definitive agreement. As a sign of its commitment, C&D has paid Chariot a refundable US$100,000 (A$140,600) exclusivity fee.

If the parties proceed to a definitive agreement, C&D will provide Chariot with a US$500,000 (A$703,000) interest-free prepayment, which would be amortised against future DSO sales invoices.

The proposed deal comes as Nigeria looks to carve out a bigger role in the global battery supply chain.