Armada Metals has signed a binding term sheet for the acquisition of Midwest Lithium, a company focused on the exploration and development of hard rock lithium projects in South Dakota, US.
The acquisition is set to enhance Armada’s position in the lithium market, which is crucial for the growing electric vehicle industry.
Midwest Lithium’s projects are located in the Black Hills region, encompassing five key areas, notably Keystone, Hill City, Phelps, Tin Mountain, and Scott’s Rose.
This deal is structured such that Midwest shareholders will own 50% of Armada upon deal completion.
The consideration shares will be subject to a 12-month voluntary escrow period. The completion of the transaction is contingent upon satisfactory due diligence by Armada and the negotiation of formal agreements.
Regulatory approvals and shareholder consent from both companies are also required, alongside the continuation of underwriting by Strata Investment Holdings for the capital raise.
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To fund exploration and operational costs, Armada plans to raise at least $5m in equity capital.
Strata Investment Holdings, one of Armada’s largest shareholders, has committed to underwrite A$2.5m ($1.7m) of this amount. Canaccord Genuity and SCP Resource Finance will lead the capital-raising efforts.
In line with the proposed transaction, Armada’s senior management may receive options to purchase new shares at a 67% premium to the capital raising price, subject to shareholder approval.
These options will represent 10% of Armada’s enlarged share capital post-completion.
Following the transaction, Armada’s board will be reconstituted to include five directors, with three nominated by Armada and two by Midwest, reflecting the new strategic direction of the combined entity.
Armada non-executive chairman Rick Anthon said: “This is a transformative deal for Armada and the company’s shareholders.
“While we remain committed to our projects in Africa, we will be acquiring drill-ready lithium pegmatite projects in South Dakota, US, where we will aim to generate rapid and successful exploration results.
“This is an exciting new opportunity that builds on our existing in-house experience in the lithium sector which will greatly assist us in realising the potential of these highly prospective projects and developing domestic lithium supply in the US.”
