Item 2.01 Completion of Acquisition or Disposition of Assets.
Acquisition of 60% Interest in Wodgina Project
On the Completion Date, Albemarle Wodgina completed its acquisition from WLPL of a 60% interest (the “Sale Interest”) in certain assets comprising MRL’s Wodgina lithium project in Western Australia (the “Wodgina Project”), pursuant to a previously announced Asset Sale and Share Subscription Agreement among Albemarle Wodgina, Albemarle, WLPL, and MRL entered into on December 14, 2018 and amended on August 1, 2019 and the Completion Date.
The purchase price for the Sale Interest was US$1.3 billion (the “Purchase Price”), comprised of (i) a payment by Albemarle Wodgina of US$820 million in cash (the “Cash Payment”), subject to adjustments as described below, and (ii) the transfer to WLPL, pursuant to the MRL Kemerton ASA (as described below), of a 40% interest (the “Kemerton Sale Interest”) in certain lithium hydroxide conversion assets being built by Albemarle Lithium in Kemerton, Western Australia (the “Kemerton Assets”, further described below). The parties agreed that the value of the Kemerton Sale Interest is US$480 million, based on total anticipated construction costs of the Kemerton Assets of US$1.2 billion (the “Forecast Construction Costs”). The sale and transfer of the Sale Interest in exchange for the Cash Payment and the transfer of the Kemerton Sale Interest is referred to as the “Transaction.”
The Sale Interest includes a 60% legal and beneficial interest in the mining tenements owned by WLPL relating to the Wodgina Project, including all mineral rights within those tenements, other than rights to iron ore (which will be retained by WLPL) and tantalum (which will remain held by a third party). The Sale Interest also includes a 60% legal and beneficial interest in the spodumene processing plant (the “Processing Plant”) and all of the other material physical infrastructure owned or constructed by WLPL or any of its affiliates that is required for the operation of the Wodgina Project (other than the crusher to be utilized in connection with the Wodgina Project, which will be retained and operated by an affiliate of WLPL, as described in Item 1.01 above, and certain other assets used in connection with the construction of the Wodgina Project) (the “Wodgina Infrastructure”). In addition, the Sale Interest includes the assumption of certain liabilities relating to the period following the completion of the Transaction (“Completion”), including 60% of the financing lease liabilities for certain mobile mining equipment included in the Sale Interest.
The Purchase Price is subject to a post-Completion adjustment of (A) up to US$25 million in aggregate for 60% of (i) the difference in the value of certain inventory as of April 1, 2019, being the date of the commissioning of the first stage of the Processing Plant (the “Economic Effective Date”), and as of Completion and (ii) the operational expenses and revenues of the Wodgina Project between the Economic Effective Date and Completion, less (B) approximately AU$3.59 million related to the retention by WLPL of certain mobile equipment. In addition, if the actual costs of constructing the Kemerton Assets are less than the Forecast Construction Costs, Albemarle Wodgina will be required to pay 40% of the difference to WLPL.
At Completion, Albemarle Wodgina also acquired 60% of the share capital of the Manager from WLPL.
The information disclosed in Item 2.03 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.
Disposition of 40% Interest in Kemerton Assets
Also on the Completion Date, concurrently with and as partial consideration for the transfer of the Sale Interest in the Wodgina Project to Albemarle Wodgina, Albemarle Lithium transferred to WLPL the Kemerton Sale Interest pursuant to the previously announced MRL Kemerton Asset Sale Agreement (the “MRL Kemerton ASA”) entered into on August 1, 2019 among Albemarle Lithium, Albemarle Wodgina, WLPL, MRL, and Albemarle.
The Kemerton Sale Interest constitutes a 40% legal and beneficial interest in the Kemerton Assets. The Kemerton Assets include a refinery plant to convert spodumene concentrate into lithium hydroxide (the “Kemerton Refinery Plant”) and certain other related infrastructure assets. The Kemerton Refinery Plant is being built in two stages, with each stage designed to have a processing capacity of up to 25,000 ktpa of lithium hydroxide. Albemarle has retained the right to build additional processing capacity (with the potential for three further stages, each of up to 25,000 ktpa of lithium hydroxide) at the Kemerton facility for its sole benefit (the “Kemerton Expansion Capacity”). The Kemerton Expansion Capacity is excluded from the Kemerton Sale Interest.
As noted above, the parties agreed that the value of the Kemerton Sale Interest is US$480 million, based on the Forecast Construction Costs of US$1.2 billion. If the actual costs of constructing the Kemerton Assets are less than the Forecast Construction Costs, Albemarle Wodgina will be required pay 40% of the difference to WLPL. Albemarle Lithium is responsible for completing the construction and commissioning of the Kemerton Assets at its own cost (even if the costs exceed the Forecast Construction Costs), and will transfer to the Manager custody and control of each item of the Kemerton Assets upon its commissioning, provided that Albemarle Lithium will continue to operate the Kemerton Assets thereafter pursuant to a plant services agreement to be entered into with the Manager. The construction and commissioning of the Kemerton Assets is expected to be completed in stages starting in the first half of 2021.
Concurrently with the transfer of the Kemerton Sale Interest to WLPL, Albemarle Lithium’s remaining 60% interest in the Kemerton Assets (the “Albemarle Kemerton Interest”) was transferred to Albemarle Wodgina.
Entry into MARBL Lithium Joint Venture
The information disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off Balance Sheet Arrangement of a Registrant.
The Cash Payment paid by Albemarle Wodgina for the Sale Interest at Completion was funded by new borrowings under an unsecured credit facility (the “New Credit Facility”) entered into on August 14, 2019, among Albemarle, Albemarle Wodgina, and certain of their affiliates, the several banks and other financial institutions parties thereto as lenders, JPMorgan Chase Bank N.A., as Administrative Agent, and JPMorgan Chase Bank, N.A. and BofA Securities, Inc., as joint lead arrangers.
The New Credit Facility is described in Albemarle’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2019, which description is incorporated by reference into this Item 2.03.