PNN enters non binding agreement for lithium assets

Our Investment Power Minerals (ASX: PNN) just entered into a Term Sheet for a JV that could see its Argentinian lithium triangle lithium assets taken to production or sold for US$50M

PNN has 2 rare earth projects in Brazil, one that is currently drilling and another that was recently acquired.

In the background PNN has held onto some lithium projects which it has had for a few years now, which is the focus from today’s announcement.

PNN is now in discussions with Summit Explore Corporation which is a subsidiary of Summit Nanotech who provides DLE (Direct Lithium Extraction) technologies capable of extracting the lithium.

This agreement covers the 5 lithium salars PNN controls in the region (Incahausi, Rincon,

Pocitos, Pular and Arizaro).

Which follows an update earlier in the year where a prior deal was cancelled by PNN due to the increase in lithium prices and sentiment, so it has been able to go out and get a better deal for these assets.

This included giving up 59% in the Rincon project only for just US$4M investment by them, so this is clearly with a much more technologically advanced partner who is much more capable of getting this to production.

Today, the Term Sheet involved a figure of US$50M that Summit would be able to pay out during the PFS (Preliminary Feasibility Study) period to purchase PNN’s remaining share under the current framework:

(source)

Under the terms of the Term Sheet, both sides have agreed to a 90 day period to make this binding and turn it into a definitive agreement.

So assuming the deal completes in its current form, PNN would have both the high-tech extraction solution and the funding path needed to move toward production.

Under the terms, Summit’s subsidiary Explore can earn a 59% interest in PNN's Salta Lithium Project by funding and building a 5,000t commercial DLE plant.

As a part of this, Summit will fund up to US$6M for immediate exploration and a Preliminary Feasibility Study (PFS).

This also comes with a buyout option, with Summit having the option to acquire the entire project for US$50M cash during the PFS period, the length this applies for will be confirmed in the final agreement.

For context PNN’s market cap is ~A$34M, so that US$50M figure is just over double this when converted at the current exchange rate, there is of course no guarantee that PNN will receive this payment.

By partnering with Summit Nanotech, PNN has essentially "outsourced" the technical risk which is often a major hurdle for junior explorers and developers, especially in lithium brines.

Summit’s technology is designed to blend brines from multiple salars, so it will be looking to create a multi-salar hub that could be more economic than separate single site operations.

Something that caught our eye in this announcement is Summit’s plan to acquire up to three additional projects in the region to add to the Joint Venture.

As a part of this point, PNN will retain a 41% interest in these new projects at no extra cost, so PNN gets an included stake in up to 3 extra projects that Summit intends to add to the JV.

This "Land and Expand" strategy suggests that Summit sees PNN’s current projects as the anchor piece for a larger regional lithium hub, where it sees itself being able to fill in the missing pieces.

With the US and Canada pushing for sustainable lithium supply chains, having a Canadian tech partner like Summit provides PNN with a clear pathway with “Green Lithium" credentials

We have also recently seen major players like Rio Tinto and Eramet doubling down on Argentina’s Lithium Triangle.

So we think that the entry of a high tier tech provider like Summit Nanotech into PNN’s lithium projects is a significant validation of the asset's quality.

Here is an overview of the project, including where AGY’s all important water source sits up in the north:

(source)

PNN is also progressing 2 rare earth assets which are its current main focus, one was acquired earlier this month which sits near MEI and VMM’s rare earth assets, within the same Caldera.

See our recent article on that here: PNN: New Brazil rare earths project. 156 drill holes. High grade hits. SGQ 2.0?

What’s next for PNN?

🔄Deal completion of recently acquired rare earths project

We want to see PNN complete its due diligence on the project and formally agree to the terms of the option to take ownership of the project.

🔄Drilling at existing Brazilian rare earths project

We want to see PNN doing deeper RC drilling and PNN commenced this program in late January. (source)

We also want to see PNN drill out and define a maiden JORC resource estimate in Brazil to enable comparison to peers, a maiden JORC resource estimate is expected this quarter. (source)

Here are the milestones we are tracking on PNN’s Brazilian rare earths project:

Milestones:

✅ Geophysics/Geochemistry work (geophysics results recently)

✅ Drilling starts (Auger drilling started, RC drilling commenced - today)

🔄 Drilling results

🔲 Maiden JORC resource estimate

🔄Regain control of the Rincon lithium asset

PNN will now need to repay US$1M to the previous Joint Venture partner (Navigate Energy) which it plans to do soon following the recent raise to take 100% ownership of the Rincon asset.

(source)

As of today PNN hasn’t confirmed it has made the payment.

🔄Lithium JV deal with Summit for lithium assets

PNN has entered into a non binding term sheet which it aims to turn into a binding agreement within 90 days which would see it form a JV with Summit with PNN retaining 41% control of it and possibly 3 additional projects Summit may bring into the JV.

Summit is capable of providing the DLE extraction and would be tasked with constructing a pilot plant to produce a 5,000t DLE plant and take the JV through to a PFS.

Summit would be able to take entire control of the projects for US$50M, so we await during the 90 day period to see if this deal completes and the final terms of the agreement.