PERTH (miningweekly.com) – ASX-listed Neometals and fellow-listed Mineral Resources on Thursday announced that their jointly-owned subsidiary Reed Industrial Minerals had entered into a memorandum of understanding (MoU) for an offtake and equity investment with China’s second-largest lithium producer.

Under the terms of the MoU, Jiangxi Ganfeng would acquire an up-front 25% interest in Reed Industrial by way of a share sale and equity subscription, leaving Neometals with a 45% interest in Reed Industrial, while Mineral Resources would maintain a 30% shareholding.

Neometals would net some $19.5-million from this initial transaction.

Furthermore, Mineral Resources subsidiary Process Minerals International and Jiangxi would both be granted options by Neometals to increase their respective shareholding in Reed Industrial to 43.1% each by the fourth quarter of 2016 by way of a share purchase.

If these options were fully exercised, Neometals would be left with a 13.8% shareholding in Reed Industrial.

The MoU also established that Mineral Resources would build, own and operate the Mt Marion mining, crushing and beneficiation infrastructure and equipment, pursuant to a fixed price mining service contract.

Furthermore, Jiangxi would enter into a long-term offtake agreement for all spodumene product produced from the Mt Marion lithium project, at benchmarked market prices, subject to an agreed price floor.

Under the offtake agreement, from the fourth year of operations, Reed Industrial would reserve the right to take 51% of the total production if greater commercial benefit could be derived from the product.

Reed Industrial earlier this month gained full ownership of the Mt Marion project, in Western Australia, after completing a deal with joint venture partner Metals X.

The MoU with Jiangxi would be subject to a number of conditions, including government and shareholder approval, board approval and the completion of a financial, technical and legal due diligence.