China National Resources (CHRM), an exploration company listed on the NASDAQ stock exchange, has announced that it could pay up to US$1.75 billion for a lithium operation in Zimbabwe.
In a statement, the company announced that it will buy Williams Minerals, which holds lithium claims in Zimbabwe, potentially joining a queue of global companies buying up lithium assets in the country to corner supplies of the in-demand battery metal.
This should be good news. The problem is, so far, little is known among industry players about the asset that the company says it is buying. The structure of the transaction is also unclear, as it will see a holding company selling a mine to a company listed as its own subsidiary.
After the reports of the deal on Tuesday, newZWire reached out to a few executives in the lithium exploration business for information about Williams Minerals, its ownership, and where its assets may lie. None of those we reached knew much.
“We have no idea, and my team has no idea either,” said one executive who has been involved in lithium transactions recently.
Another executive said: “We are looking at this too. The US$1.75 billion may be just their expected or speculative capex spend.”
What are the plans?
According to China National Resources, it will issue restricted shares and promissory notes to fund the acquisition for a maximum of US$1.75 billion, with US$140 million as the initial payment. It may also pay some of the price in cash.
Williams Minerals, China National Resources says in its release, is owned by Top Pacific Ltd and Feishang Group, who are also the shareholders of China Natural Resources. China Natural Resources, however, said there was no guarantee that the deal, expected to be sealed in the second fiscal quarter of 2023, will happen under the current terms.
What do we know about the asset the company is buying?
Not much. The statement released on Tuesday does not state where Williams Minerals holds claims, as such statements usually do. However, in a separate filing to the United States Security and Exchange on February 27, China Natural Resources says Williams holds Special Grant No. 7507, a lease that covers 8682 hectares “in the Mining District of Manicaland, Zimbabwe”.
The asset is said to hold an estimated 3.5 million tonnes of “measured, indicated and inferred resources of lithium oxide – grade 1.06% or above in accordance with the standard under the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves – priced at US$500 per tonne”.
What do we know about China Natural Resources itself?
The company has a market capitalisation of US$29 million and its last results show that it has annual revenue of US$2.95 million.
According to its annual report, the company has two operating segments: wastewater treatment and exploration and mining. While exploration companies need not be cash-rich or large mining companies, the firm’s only listed resource investment is an exploration licence for Moruogu Tong Mine, located in China’s Mongolia region. The SEC filings give its Zimbabwe address as 1 Stonehurst, Zvimba Rural District Council.
Why are we asking questions?
Firstly, this new deal is unlike recent transactions in Zimbabwean lithium, where larger companies bought out smaller miners and explorers. Under this proposed transaction, Feishang is actually selling Williams Mining to its own subsidiary, China National Resources, in which it holds 65%. Feishang, on its website, says it has annual sales of US$3 billion.
Secondly, if the deal does reach the potential US$1.75 billion – which the company itself says is not guaranteed – it would be an unlikely four times what Huayou Cobalt paid Prospect Resources for Arcadia Mine in 2022. In 2021, Chengxin, the Shenzhen-listed company, spent US$76.5 million for 51% of Max Mind, which holds 55 mining claims astride some 3 800 hectares.
Since 2021, Zimbabwe has recorded transactions worth a combined US$700 million. Most have been led by large, globally credible entities, such as Huayou, Chengxin and Sinomine. These companies gave full details on what they were buying, and how much they intended to invest in them to bring them to production. With public debate on the new Mining Bill ongoing, there is pressure for clearer rules on mine claims and title, specifically on who-owns-what. In the lithium rush, Zimbabwe must demand more detailed disclosures from would-be investors.