LONDON: Savannah Resources Plc, the developer of the Barroso Lithium Project in Portugal, Europe’s largest spodumene lithium deposit, has entered a strategic partnership with the AMG Critical Materials N.V. Group, the Amsterdam-listed, global critical materials business.

AMG’s wholly owned German subsidiary, AMG Lithium B.V., an established spodumene concentrate producer and, in the second half of 2024, the first major European lithium chemical producer, has invested GBP16m in Savannah through a subscription for 342,612,420 new ordinary shares of 1 pence each in the Company (“Ordinary Shares”) at a price of 4.67p (representing a 35% premium to the 30-day VWAP) to become the Company’s largest shareholder.

This investment will allow Savannah to reach a Final Investment Decision (‘FID’) point on the Project. The partnership also includes an offtake heads of terms agreement (the ‘Offtake HoT’) through which, once final agreements are negotiated and signed, AMG can purchase 45ktpa of spodumene concentrate from the Project (approximately 25% of total) for 5 years based on prevailing market prices at the time.

In addition, AMG will take a lead role in the partnership in securing a ‘full project financing solution’ for the Project’s development. If such financing is successful, the Offtake HoT anticipates the increase and extension of the offtake arrangements to 90ktpa for 10 years.

Highlights:

·      First outcome from Savannah’s Strategic Partnership Process: The process has delivered an agreement with AMG, a global critical materials business and established operator in the lithium sector, which is targeting 100ktpa of battery grade lithium chemical production from its new lithium hydroxide production facility in Germany.

·    Initial funding finances Savannah’s Project through to an FID: Savannah is now fully funded to complete its planned workstreams including, the Project’s Definitive Feasibility Study, the Environmental Licencing process, team expansion, and relevant land acquisitions following AMG’s equity investment in Savannah of GBP 16m at 4.67p/share (a 35% premium to 30-day VWAP and matching the placing price of Savannah’s July 2023 fundraise).

·   Offtake HoT: Once the Project is in production, AMG can purchase 45ktpa of a target 5.5% Li₂O spodumene concentrate from the Project for 5 years at a European-equivalent spodumene concentrate price. Through this agreement, Savannah and AMG will be contributing towards the 2030 domestic extraction and processing targets for battery grade lithium raw material set in the 2023 European Critical Raw Materials Act.

·      Full funding solution: Under the Offtake HoT AMG shall be able to increase its offtake to 90ktpa for 10 years if it provides Savannah with a full funding solution for the Project’s construction which is accepted by Savannah. The June 2023 Scoping Study estimated the initial capital expenditure for the Project including a 19% contingency at USD 280m.

·      Corporate and technical input: As part of the strategic partnership and investment, AMG also receives the right to nominate one director to sit on Savannah’s Board. This is expected to be taken by one of AMG Lithium’s senior directors, who can provide technical input into the Project’s ongoing development and construction. AMG is expected and prepared to provide further, regular, technical input to the Project through a working group.

·      AMG becomes Savannah’s largest shareholder: Through its investment AMG becomes Savannah’s largest shareholder with a 15.77% stake in the enlarged issued share capital of Savannah on Admission.

·      Co-operation agreement opportunities: AMG and Savannah have also entered into a co-operation agreement whereby they have agreed to work together on a number of mutually beneficial opportunities including a study for joint construction of a feldspar/spodumene pilot plant in Portugal and a study for the construction of a Spodumene-to-Lithium Carbonate refinery in Portugal or Spain. Both endeavours could potentially help to further develop Portugal’s lithium industry as it looks to become an integral part in the European lithium battery value chain.

·      Significant unallocated offtake remains: This agreement leaves Savannah with most of its future spodumene concentrate production unallocated. This could be sold to an additional partner or on to the open market.

Emanuel Proença, CEO of Savannah, said, “We are delighted to announce this partnership with AMG, which represents another huge de-risking step for the Barroso Lithium Project. The Savannah team and I are really looking forward to working closely with AMG Lithium’s team from now on. With this investment, which follows a significant due diligence exercise, Savannah is now fully funded to complete all its current work streams. Pleasingly shareholder dilution and commitment of offtake have been kept to a minimum, providing Savannah with opportunities for further partnerships and commercial arrangements in the future.

“AMG is an ideal partner for Savannah. It is a long established, listed and profitable global metals business with a lithium upstream business that is probably the best placed to serve the booming battery and EV production sector in Europe. All stakeholders can now be certain that the first batches of Savannah’s future spodumene concentrate production will be going into lithium chemical production in Europe, for the European lithium battery value chain.

“There remains significant work ahead to take the Project to construction and production, but with the AMG partnership, Savannah can move forward with greater confidence and purpose into a very exciting future.

“We are excited to partner with Savannah on its development of the Barroso Lithium Project, Europe’s largest spodumene project,” said Dr. Schimmelbusch, Chairman and CEO of AMG. “This partnership with Savannah advances AMG’s lithium expansion strategy and further solidifies our spodumene sourcing.”

AMG Subscription

The Company has entered into a subscription agreement (the ‘Subscription Agreement’) with AMG Lithium B.V., to subscribe for 342,612,420 new Ordinary Shares at a price of 4.67 pence per new ordinary share, (the ‘Subscription Shares’) equating to 15.77% of the enlarged issued share capital of the Company, following Admission.

The Subscription Agreement includes a lock-in period of up to 24 months followed by a 12-month orderly market provision whereby AMG shall be required, at least 10 Business Days prior to any sale, to consult with the Company and its nominated adviser regarding the details of such sale.