Winsome walks away from Renard diamond mine buy

Winsome Resources (ASX: WR1) is dropping its proposed acquisition of the Renard diamond mine, a deal that would have fast-tracked the development of its flagship Adina lithium project in northern Quebec.

This week, Winsome announced that it has exercised its right to terminate the call option agreement, citing the “evolving lithium market conditions and broader macroeconomic considerations.”

“The company remains focused on the advancement of its flagship Adina lithium project and continues to monitor sector conditions and assess opportunities aligning with its long-term strategy and capital allocation priorities,” the company stated in a release on Tuesday.

In April 2024, the Australian lithium developer entered into an option agreement with Canada’s Stornoway Diamonds to acquire the past-producing diamond mine in the James Bay region, which operated for nearly a decade until market conditions forced its shutdown in late 2023. Stornoway became a private company in 2019.

Infrastructure repurpose

The plan for Winsome was to repurpose the existing mine infrastructure at Renard for processing ore from its Adina project, which would cost far less than developing its own lithium processing facilities from scratch. The Renard site has had $900 million invested in its development, and is estimated to have a processing capacity of 2.2 million tonnes per year.

Since signing the agreement, the company has taken its time to evaluate the potential acquisition and extended the option date several times, with the most recent deadline set for Aug. 31, 2025. To activate the option, it would need to pay a total consideration of $52 million, including an initial payment of $4 million.

The Adina project is hailed as one of the top three largest lithium resources in North America, at nearly 78 million tonnes grading 1.15% lithium oxide, about half of which is in its production plans. Over an estimated life of 21 years, the mine is expected to produce 280,000 tonnes of spodumene concentrate annually.

Anchored by this production, a scoping study released last year gave the project a post-tax net present value of US$743 million, an internal rate of return of 43%, and a payback period of 1.8 years. However, the spodumene concentrate prices at the time are forecasted at $1,375 per tonne, more than double the current market price.

Winsome shares fell 8.5% to A16¢ apiece on Thursday in Sydney, for a market capitalization of A$37.9 million. Its stock has traded in a 12-month period of A12¢ to A65¢.