Australia’s Jindal Lithium (ASX:JLL,OTCQX:JNDAF) is spinning off its US asset portfolio into a newly formed company that will list on Nasdaq through a US$571 million blank-check merger.
The newly formed entity, US Elemental, will merge with Constellation Acquisition, a special purpose acquisition company (SPAC) sponsored by affiliates of Antarctica Capital, a New York-based investment firm with more than US$10 billion of assets under management.
At the core of the transaction is the McDermitt lithium project in Oregon, widely believed to have one of the largest undeveloped lithium reserves in the US.
Along with the Clayton North project in Nevada, the property is currently held by Hitec Minerals, a wholly owned subsidiary of ASX-listed Jindal.
“Establishing US Elemental as a US-listed company represents a significant milestone in unlocking the value of our US lithium assets,” said Ian Rodger, CEO of Jindal and incoming CEO of US Elemental. said in a statement.
Rodgers said, “We believe the McDermitt project is one of the largest lithium resources in the United States, and this transaction is expected to provide the company with access to the capital and strategic partnerships needed to advance development.”
The McDermitt Project boasts an astonishing mineral resource of approximately 21.5 million metric tonnes of lithium carbonate equivalent (LCE).
According to a recently completed report pre-feasibility studyIt is estimated that the property will support a mine life of 63 years. During its first decade of operation, the site is planned to produce approximately 47,500 metric tons of lithium carbonate annually.
The project economics outline an estimated US$3.2 billion net present value (at an 8 percent discount rate) and a 17.9 percent after-tax internal rate of return.
Despite transitioning the assets to a US-listed vehicle, Jindali intends to maintain tight control. The Australian parent company will transfer 100 percent of its equity interest to the new entity, which is expected to hold approximately 80 percent or more of US Elemental post-close, subject to customary adjustments and SPAC shareholder redemptions.
The transaction envisages a concurrent capital raising of US$20 million to US$30 million, to finance the next phase of technical studies and permitting. This includes a US$4 million private investment in public equity (PIPE) led by Antarctica Capital’s affiliates along with potential third-party investors.
Following the transaction, US Elemental is expected to hold approximately US$15 million in cash on its balance sheet, net of transaction expenses.
For Constellation and its sponsor, the merger takes advantage of the structural supply deficit looming over the battery metals sector.
“We believe US Elemental provides investors exposure to a significant US lithium resource at a critical time for the industry,” said Chandra Patel, Chairman and CEO of Constellation and Managing Partner of Antarctica Capital.
“Demand for battery materials continues to grow and there is increasing emphasis on developing domestic sources of supply. The McDermitt project, combined with the scale of the team’s experience and resource, creates a strong platform for long-term growth.”
The deal is subject to regulatory and shareholder approval as well as a minimum cash consideration of US$14 million.
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Securities Disclosure: I, Gian Liguid, do not have any direct investment interest in any of the companies mentioned in this article.
Editorial Disclosure: Jindalee is a client of Lithium Investing News Network. This article is not paid content.
