The Prospect Resources Limited (ASX: PSC) share price shot out of the blocks early in the session today.
The company's shares were up 27% at 97 cents shortly after market open. However, they have since retreated are now swapping hands for 79 cents apiece, up 3.27%
Investors are responding positively to a company announcement that Prospect has sold its 87% shareholding in Prospect Lithium Zimbabwe (PLZ) Limited, owner of the Arcadia Lithium Project in Zimbabwe. Here are the details.
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What did Prospect Resources announce?
Prospect advised it has executed a binding share sale agreement (SSA) with Huayou International Mining Limited for the sale of its stake in the Arcadia project.
Huayou has agreed to purchase Prospect's 87% shareholding in PLZ and associated intercompany loans for approximately US$377.8 million (A$524.2 million) via an upfront cash consideration, equating to approximately A$1.23 per Prospect ordinary share.
The company notes this valuation represents a premium to Prospect's 10-day volume weighted average price (VWAP) of approximately 78%.
Prospect says the transaction represents the "culmination of the strategic partnership process undertaken by [the company] since August 2021".
Arriving at this outcome wasn't an easy one for the company. Along the way, Prospect received seven non-binding proposals for the advancement of Arcadia from a range of international parties. These proposals "encompassed structures including development joint ventures, offtake prepayment debt funding and acquisition of Prospect's interest in Arcadia".
After "careful evaluation", the Prospect board formed the view that the sale of its stake in PLZ to Huayou delivers the most attractive risk-adjusted, post-tax value outcome for Prospect shareholders.
What are the details?
There are a number of key conditions to complete the transaction. These include Prospect shareholder approval, requisite Chinese regulatory approvals being obtained by Huayou, and several other precedents outlined in the release.
Payments will be made over several tranches beginning with a deposit of US$20 million immediately payable by Huayou. This is non-refundable in certain circumstances where the transaction does not complete. A break fee of US$20 million payable by Prospect in certain circumstances of non-completion also applies.
Prospect intends to distribute the remaining net proceeds to its shareholders, and anticipates the transaction completing in late Q1 or early Q2 2022.
Prospect Resources share price summary
In the past 12 months, the Prospect Resources share price has soared by around 520%. It has also rallied by 355% this year to date.
It has gained 15% in the past month and is also up by 23% in the past week of trading.
Prospect Resources has outpaced all major benchmarks in these time frames.
