Firefinch [ASX:FFX] Shares Rise as Spin-Off Firm Leo Lithium Raises $100M

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Firefinch [ASX:FFX] noted progress on its proposed demerger from Leo Lithium, as the latter raises $100 million in its initial public offering.

Firefinch, who holds both gold and lithium assets, is up 200% over the past 12 months, benefiting from the hot EV theme and a rush to gold during these volatile times.

Despite the strong interest in battery tech — especially lithium — Firefinch decided to spin-off its lithium assets as a separate ASX-listed company, Neo Lithium.

ASX:FFX stock prices chart


Leo Lithium readies for market debut with $100 million IPO

Firefinch today updated the market about the $100 million IPO of Leo Lithium.

The IPO comprised a pro-rata offer to eligible Firefinch shareholders, a shortfall offer, and an offer to Firefinch itself.

FFX said the IPO received strong support from FFX shareholders and institutional investors, closing oversubscribed.

More than 90% of the offer was allocated to existing Firefinch shareholders.

Leo Lithium’s demerger from Firefinch is nearly ratified. Firefinch said all conditions to the demerger have been satisfied barring Firefinch shareholder approval (which will be sought at a general meeting held later on Tuesday).

Once approved, FFX will transfer Leo Lithium shares to eligible FFX shareholders via a pro-rata in-specie distribution, with one Leo Lithium share for every 1.4 Firefinch shares.

The transfer is slated for Thursday, 9 June 2022.

Leo Lithium shares allotted under the IPO are now expected to be issued on Thursday, 16 June 2022.

Leo Lithium is expected to be admitted to the ASX and begin trading on Thursday, 23 June.

ASX:FFX new projects map

Source: Firefinch

FFX share price outlook: lithium or gold?

Firefinch’s Managing Director Dr Michael Anderson commented:

We are pleased to have reached this important milestone in the separation of our gold and lithium assets.

Subject to shareholder approval, the Demerger will allow Firefinch to focus its attention on the development of the world-class, multi-million-ounce Morila Gold Project, while providing our shareholders with exposure to the future development of Goulamina through our 20% retained stake.’

Leo Lithium’s Managing Director Simon Hay also said:

We are delighted with the strong support shown by Firefinch shareholders for the Leo Lithium IPO.

We look forward to receipt of shareholder approval for the proposed demerger and the commencement of Leo Lithium’s life as a separate listed vehicle.

As Firefinch notes, the Goulamina lithium asset —  set to be transferred to the spun-off Leo Lithium —  is ‘one of the world’s largest undeveloped high quality spodumene deposits’.

Given the strong rally in lithium prices over the past 18 months, some may wonder why Firefinch decided to spin-off its lithium assets, choosing to retain a minority stake in the new company.

Why not retain the Goulamina asset — and its prospective riches?

While lithium has strong tailwinds — EVs are likely to be the dominant vehicle on our freeways in 15–20 years — Firefinch may have felt that developing lithium assets isn’t as lucrative as it’s made out to be.

Especially if management thinks Firefinches skills are better suited to gold mining than lithium mining.

Particularly when you consider the latest note from Goldman Sachs.

The investment bank issued a briefing arguing that the lithium bull run is ‘over for now’, seeing a ‘sharp correction’ in lithium prices over the next two years.

But lithium isn’t the only metal needed for the green energy future.

In fact, there is a smarter way to play the EV theme, given how much capital the lithium sector has attracted, crimping gains.

In one of our latest research notes, we’ve called this battery tech metal lithium’s ‘little brother’.

If you would like to find out more about it, click here to read The NEXT Lithium report.



Kiryll Prakapenka,

For Money Morning

About Kiryll Prakapenka

Kiryll Prakapenka is a research analyst focusing on investigating the biggest trends in investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from the University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding…

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