425: Usha Resources to Sell Up to 90% of Jackpot Lake Lithium Project for $26 Million

Usha Resources has entered a Letter of Intent to sell up to 90% of its Jackpot Lake Lithium Brine Project to Stardust Power for a total consideration of up to US$26.025 million.

Summary

• Usha Resources has signed a Letter of Intent (LOI) with Stardust Power to sell up to 90% of its Jackpot Lake Lithium Brine Project.
• The total consideration could reach up to US$26.025 million over five years, depending on the earn-in level.
• The consideration includes US$1.525 million in cash, US$750,000 in stock, and US$15.75 million in stock or cash at Stardust Power's election, plus a US$8 million work commitment.
• Usha would retain a 10% interest in the project and a 2% Net Smelter Royalty (NSR) after the full earn-in, and would be carried in the Joint Venture (JV) until a formal Decision to Mine is reached.
• Stardust Power has the option to buy back 1% of the NSR for US$7.5 million.
• Stardust Power has already paid Usha a non-refundable sum of US$75,000.
• The LOI includes an exclusivity agreement preventing Usha from engaging with other parties regarding the project until September 2024.
• The transaction is contingent on Stardust Power's due diligence, the execution of definitive agreements, and approval from the TSX Venture Exchange.
• Stardust Power is developing a lithium refinery in Muskogee, Oklahoma, with a planned capacity of 50,000 tons per annum of battery-grade lithium carbonate (BGLC).
• Stardust Power is expected to become a publicly traded company on Nasdaq under the ticker symbol SDST via a planned business combination with Global Partner Acquisition Corp II (NASDAQ:GPAC).
• Usha Resources has agreed to pay a finder's fee to 2818390 Ontario Corp based on the transaction value.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. Usha is potentially monetizing an asset for a significant sum, while retaining upside. Stardust Power is progressing its plans to become a major lithium producer. However, the deal is not yet finalized and subject to conditions.

Positives

• Usha Resources could receive up to US$26.025 million for the Jackpot Lake Lithium Brine Project.
• Usha retains a 10% interest and a 2% NSR, providing continued upside potential.
• The deal allows Usha to focus on acquiring advanced-stage copper and/or gold projects.
• Stardust Power's development of a lithium refinery in Oklahoma could provide a reliable offtake partner.

Negatives

• The LOI is non-binding, and the transaction is subject to several conditions, including due diligence and regulatory approvals.
• There is no guarantee that the Definitive Agreement will be completed or that Stardust Power will be listed on NASDAQ.
• Usha is temporarily restricted from engaging with other potential buyers for the Jackpot Lake Project until September 2024.

Risks

• Failure to finalize the Definitive Agreement with Stardust Power.
• Stardust Power failing to secure NASDAQ listing.
• Delays or challenges in Stardust Power's lithium refinery development.
• Unfavorable due diligence findings by Stardust Power.
• TSX Venture Exchange not approving the transaction.

Future Outlook

Usha Resources intends to use the proceeds from the potential sale to acquire advanced-stage copper and/or gold projects. Stardust Power aims to become a major supplier of battery-grade lithium carbonate to the EV market.

Management Comments

• Deepak Varshney, CEO of Usha, stated that the development of the Jackpot Lake Lithium Brine Project is a key focus of the company.
• Mr. Varshney also mentioned that Usha is evaluating opportunities to acquire advanced-stage copper and/or gold projects to create further shareholder value.

Industry Context

The announcement reflects the increasing demand for lithium due to the growth of the electric vehicle (EV) market and the strategic importance of securing domestic lithium supplies in North America. Stardust Power's planned lithium refinery aims to address this demand and reduce reliance on foreign sources.

Comparison to Industry Standards

• Albemarle's Silver Peak Nevada Lithium Mine, cited as a geological analogue, has been in continuous operation since 1966, highlighting the potential longevity of lithium brine operations.
• Stardust Power's planned 50,000 tons per annum lithium refinery capacity would position it as one of the largest in the United States, comparable to or exceeding the scale of existing and planned facilities by companies like Livent and Piedmont Lithium.
• The earn-in structure and NSR terms are common in the mining industry, similar to deals seen with other lithium exploration companies such as Lithium Americas and Standard Lithium.

Stakeholder Impact

• Shareholders of Usha Resources may benefit from the potential influx of capital and the company's focus on new acquisitions.
• The transaction could create jobs in Nevada related to the Jackpot Lake Project.
• Stardust Power's lithium refinery could create jobs in Oklahoma and contribute to the US's energy independence.
• The deal could benefit the EV industry by increasing the supply of battery-grade lithium carbonate.

Next Steps

• Stardust Power to conduct commercial and legal due diligence on the Jackpot Lake Project.
• Usha and Stardust Power to negotiate and execute definitive agreements.
• Stardust Power to seek approval for its business combination with Global Partner Acquisition Corp II (GPAC).
• Usha to evaluate and potentially acquire advanced-stage copper and/or gold projects.

Key Dates