Letter of Intent for a Joint Venture and Project Funding

Rhea-AI Summary

Lithium South Development (TSX-V: LIS) (OTCQB: LISMF) has signed a Letter of Intent (LOI) with an undisclosed private European for the development and financing of the Hombre Muerto North Lithium Project in Argentina. The key terms include:

- Up to US$10 Million capital loan procurement for completing a Definitive Feasibility Study (DFS)
- Project funding for 80% of CAPEX as defined in the DFS
- The Party earns 10% upon delivering a US$9M loan confirmation letter, and additional 30% upon confirming 80% CAPEX funding
- Option for Special Warrants worth US$1M, convertible to 10% of LIS shares
- 80% lithium production offtake rights with 4% commercialization commission

The agreement is subject to conditions including renegotiation of existing Chemphys/LIS offtake agreement, due diligence completion within 60 days, and various approvals.

Positive

• Potential securing of up to US$10M funding for Definitive Feasibility Study
• Project funding commitment for 80% of future CAPEX requirements
• Secured offtake agreement for 80% of lithium production

Negative

• Potential 40% project-level dilution through earn-in agreement
• 10% share dilution through Special Warrants issuance
• 60-day exclusivity period limiting other partnership opportunities
• Existing Chemphys offtake agreement requires renegotiation

VANCOUVER, BC, Jan. 14, 2025 /PRNewswire/ -- Lithium South Development Corporation (the "Company" or "Lithium South") (TSX-V: LIS) (OTCQB: LISMF) (Frankfurt: OGPQ) is pleased to announce the signing of a Letter of Intent ("LOI")( January 10, 2025 )for the cooperative development of the Hombre Muerto North Lithium Project ("HMN Li Project"), located in Salta Province, Argentina.

Letter of Intent

The Company and a non-related party ( the "Party") which will remain confidential until the completion of a Definitive Agreement ("DA"), have entered into an LOI for the development and financing of the HMN Li Project. The Party is a private European corporation with strong financing abilities.  The LOI was entered into with the approval of the majority of the board of directors of Lithium South. The following is a summary of the terms of the LOI:

1.  On a best-efforts basis, the Party will procure a capital loan for up to US$10 Million for the completion of a Definitive Feasibility Study ("DFS") on the HMN Li Project;

2.  On a best-efforts basis, the Party will procure project Funding for 80% of the CAPEX as defined in the DFS;

3.  An earn-in at the project level whereby the Party earns 10% upon delivery of a loan confirmation letter for up to US$9million for the DFS and a further 30% upon delivery of a loan confirmation letter for project Funding for 80% of the CAPEX;

4.  At the option of the Party and at completion of the Definitive Agreement, the Company agrees to issue to the Party Special Warrants for a price of US$1 Million.  The Special Warrants when converted will equal 10 % of the issued and outstanding shares of LIS at the time of conversion. The funds will be allocated 70% to the DFS and 30% to general working capital.

5.  The Party will obtain rights to 80% of the lithium production at the HMN Li Project as an offtake, with a commercialization commission of 4% of gross sales.

6.  The Party will be granted rights of first refusal in respect of the sale of any interest LIS holds in the HMN Li Project and any future placement of equity in LIS.

The foregoing arrangements are subject to LIS and the Party entering into a DA. Conditions Precedent to entering into the DA include renegotiation of the existing Chemphys/LIS offtake agreement to the satisfaction of the Party, completion of due diligence by the Party within 60 days (which has already commenced), the approval of each respective board, exchange and regulatory approval and no material adverse change in the business affairs of LIS or the Party. 

During the 60 day period, the Company will not solicit any further business interests nor continue with discussions with current parties of interest.

Further details will be provided when available.  

About Lithium South

Lithium South owns 100% of the HMN Li Project located in Salta and Catamarca Provinces, Argentina, in the heart of the lithium triangle.  The Salar del Hombre Muerto has a history of lithium production, with Arcadium Lithium (as a result of the Alkem and Livent merger) in operation to the south of the HMN Li Project for over twenty-five years..  Arcadium Lithium is currently being acquired by Rio Tinto for U.S. 6.7 billion. The HMN Li Project is adjacent to the east with a  US$ multibillion lithium development under construction by POSCO (Korea). Exploration work to date has delineated a NI 43-101 compliant 1,583,200 tonne Lithium Carbonate Equivalent ("LCE") Resource (See Note 1 below) on the Alba Sabrina, Natalia Maria, and Tramo claim blocks, three of five non-contiguous blocks that make up the HMN Li Project.  A recent Preliminary Economic Assessment published April 30, 2024, delineates potential to develop a 15,600 tonne per year lithium carbonate project.  A bulk sample of evaporated brine from the project site is now being harvested for further test work in Salta, Argentina.

On behalf of the Board of Directors

Adrian F. C. Hobkirk
President and Chief Executive Officer
Investors / Shareholders call 855-415-8100 / website: www.lithiumsouth.com 

Note 1: A report titled, Updated Mineral Resource Estimate – Hombre Muerto North Project, NI 43-101 Technical Report Catamarca and Salta, Argentina, Mark King, PhD, PGeo, Peter Ehren, M.Sc, MAusIMM, September 5th, 2023.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. The TSX Venture Exchange has not reviewed the content of this news release and therefore does not accept responsibility or liability for the adequacy or accuracy of the contents of this news release.

This news release contains certain "forward-looking statements" within the meaning of Section 21E of the United States Securities and Exchange Act of 1934, as amended. Except for statements of historical fact relating to the Company, certain information contained herein constitutes forward-looking statements. Forward-looking statements are based upon opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors which could cause actual results to differ materially from those projected in the forward-looking statements.  The reader is cautioned not to place undue reliance on forward- looking statements.  We seek safe harbor.

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SOURCE Lithium South Development Corporation

FAQ

What are the key terms of LISMF's Letter of Intent for the Hombre Muerto North Project?

The LOI includes up to US$10M loan for DFS, 80% CAPEX funding, 40% project-level earn-in, US$1M Special Warrants convertible to 10% company shares, and 80% offtake rights with 4% commission.

How much funding will LISMF receive for the Definitive Feasibility Study?

The European partner will procure a capital loan of up to US$10 Million for completing the Definitive Feasibility Study.

What percentage of LISMF's project will the European partner earn through the agreement?

The partner will earn 10% upon providing the DFS loan confirmation and an additional 30%, totaling 40% project-level ownership.

What are the conditions precedent for LISMF's Definitive Agreement?

The conditions include renegotiating the Chemphys offtake agreement, completing due diligence within 60 days, board and regulatory approvals, and no material adverse changes.

What offtake rights does the European partner receive in LISMF's lithium project?

The partner receives rights to 80% of the lithium production with a 4% commercialization commission on gross sales.