SQM deal with Andrada taps into Namibian lithium

Chile’s SQM (NYSE: SQM), the world’s second-largest lithium producer, has entered into a three-stage earn-in agreement with South Africa-based Andrada Mining (LSE: ATM) to jointly develop the Lithium Ridge asset in Namibia.

The deal, SQM’s first African partnership, will leverage the lithium major’s technical and financial strengths, aiming to accelerate the development of the ML133 project, he companies said on Monday. It’s located about 35 km from Andrada’s flagship Uis tin mine. 

The agreement could see SQM secure a 50% stake in Grace Simba Investments, Andrada’s unit that holds the Lithium Ridge licence.

SQM is to pay US$2 million upfront, followed by US$20 million in exploration expenditure over three years for a 40% stake in Grace Simba. An additional 10% would be earned by funding a definitive feasibility study.

Andrada Mining, which will remain the project’s operator, also is to receive a success fee if the lithium resource exceeds 40 million tonnes.

Lithium Ridge

“This partnership solidifies our belief in the Lithium Ridge asset as a potential world-class resource and further establishes Andrada as a multi-asset, polymetallic explorer and miner,” CEO Anthony Viljoen said in the statement.

“The introduction of a substantial player in the global lithium market will also place Namibia at the forefront of the African lithium development trajectory and unlock value for the Namibian mining industry,” Viljoen noted.

Andrada Mining operates in the lithium rich Erongo Region of Namibia and aims to develop a vertically integrated industry within the country, in addition to its established tin and tantalum production from its Uis mine. The licence covers an area of about 19,700 hectares which has significant by-product potential for lithium and tantalum production. 

Shares in Andrada closed 18% higher at 3.75 pence each in London on Monday. That leaves the company with a market capitalization of £61.9 million (US$81 million). SQM stock gained 1.4% to US$34.79 apiece in New York on Monday afternoon, valuing the company at US$10.1 billion.