Huayou passes first regulatory hurdles in path towards US$422m Zimbabwe lithium deal

Huayou Cobalt factory: the company is on a buying spree

Prospect Resources and Huayou International have moved a step closer to sealing a US$422 million acquisition deal, winning key regulatory approvals in China and cancelling a previous offtake deal with another Chinese company, Sinomine.

Huayou, one of the world’s biggest companies in the battery metals business, announced in December that it would buy Prospect Resources, which is developing the Arcadia lithium mine in Zimbabwe. The deal will see the Chinese giant taking over Prospect shares, buying out minorities and all other obligations, for a total of US$422 million.

“Huayou has notified Prospect that it has obtained the outbound investment certificate for the Transaction from the Ministry of Commerce of the People’s Republic of China required for completion of the Transaction. Application for filing and registration by the National Development and Reform Commission (NDRC) has been submitted by Huayou,” Prospect said in an update Tuesday.

Huayou will then apply for exchange registrations from a government-supervised bank, “and these confirmations are expected to be received in due course”.

ANALYSIS | Chinese battery giant is buying Zimbabwe’s Arcadia lithium mine for US$422m. Here’s what you need to know

In 2018, Hong Kong and Shenzhen-listed company, Sinomine, bought a stake in Prospect and agreed to buy up to 390 000 tonnes of spodumene concentrate and over one-million tonnes of petalite over seven-years. This agreement has now been cancelled to make way for the Huayou deal. Sinomine will be paid US$8 million for the cancellation.

“Sinomine remains a 4.86% shareholder in Prospect,” the update says.

Prospect has another offtake agreement with Belgium’s Sibelco, signed in 2020. Under that deal, Prospect signed a seven-year deal to supply ultra-low iron petalite to Sibelco, the largest distributor of the metal in Europe and one of the world’s largest glass-ceramic manufacturers.

Huayou is the world’s biggest producer of cobalt, a metal used in EV batteries. It has assets of close to US$8 billion and made US$2.1 billion in revenue between January and June 2021. Prospect is listed on the Australian Stock Exchange and has been developing the Arcadia mine in Goromonzi.

Prospect will in the next two weeks call for a shareholder meeting to approve the transaction.

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