Usha Gets Paid for Exclusivity
The Canadian lithium explorer Usha Resources Ltd. (TSXV: USHA) (OTCQB: USHAF; FSE: JO0) is selling 90% of its Jackpot Lake lithium brine project in Nevada to the American IPO candidate Stardust Power Inc. The total value of the five-year earn-in deal, including shares and cash payments, amounts to $26.02 million US. Stardust has committed in a non-binding letter of intent to invest $8 million US into the project over a period of five years. An additional $18 million US in payments are due in the form of cash and shares.
Usha would retain 10 percent of the project in the end. In addition, there would be a two percent royalty, which can be reduced to 1% for a one-time payment of $7.5 million US. Usha and Stardust now intend to finalize a definitive purchase and sale agreement in the second quarter of 2024. Until then, i.e., until September 2024, the deal is exclusive, for which Stardust has paid an additional $75,000 USD (non-refundable) to Usha.
Stardust Expected to Have $490 Million USD Value on Nasdaq
Usha’s Lithium brine project Jackpot Lake is located in Clark County, 35 kilometers northeast of Las Vegas, Nevada, and covers a total area of approximately 35.3 km². The geological environment of the project is similar to that of Albemarle’s Silver Peak Nevada Lithium Mine, the only producing lithium mine in North America, which has been in continuous operation since 1966.
Stardust Power is developing a strategically centrally located lithium refinery in the Greater Tulsa area, Oklahoma, capable of producing up to 50,000 tons of battery-grade lithium annually. For the expansion of the facility, Stardust expects economic incentives of up to $257 million at the federal and state levels, in addition to other federal grants and incentives from the Departments of Energy and Defense. Stardust is utilizing direct lithium extraction (DLE) technology and plans to build a refinery facility designed for low emissions.
Stardust is expected to become a publicly traded company on Nasdaq under the ticker symbol “SDST” through a planned business combination with Global Partner Acquisition Company II (NASDAQ:GPAC). The implied pro forma enterprise value of the combined company is expected to be approximately $490 million. The transaction is anticipated to be completed in the first half of 2024.
Deepak Varshney, CEO of Usha, commented: “We are very excited about the partnership with Stardust Power at Jackpot Lake. We believe in their vision and that they are the right team to advance Jackpot Lake and develop it into one of the most important lithium brine assets in America. CEO Roshan and his team are building a world-class company, and we look forward to working with them in the coming years.”
Conclusion: Evidently, awareness of the importance of secure supply chains for critical raw materials has reached American politics. Stardust is planning investments of more than one billion US dollars for its new lithium refinery in Oklahoma and can expect generous government support. It is only logical that Stardust simultaneously secures access to a promising lithium brine project like Jackpot Lake in Nevada. After all, the new refinery must be reliably supplied with raw materials. Stardust is pursuing a holistic approach and relies on Direct Lithium Extraction (DLE) technology for lithium production, which has the smallest environmental footprint. Usha had also favored DLE technology for its Jackpot Lake project. However, with Stardust, a financial heavyweight is now on board, significantly improving the chances of success for Jackpot. In the end, from Usha’s perspective, it’s certainly better to hold 10 percent of a large project with a completed feasibility study than 100 percent of something for which their own financial resources are insufficient. The royalty for Jackpot could be worth a lot of money in a few years. The junior partner Usha has negotiated well here. But Stardust has also gotten a fair deal, as for $26 million US, it’s buying one of the most promising lithium brine projects in the USA.
