Arizona Lithium (AZL) has received conditional approval for up to $21.6m in transferable royalty credits under the OPGII Programme for Pad #1 at its Prairie Lithium project in Saskatchewan.

OGPII credits are earned on eligible expenditures and can only be claimed once the project becomes commercially operational.

The credits are applied against crown royalties payable on the production of lithium at a rate of 20% in the first calendar year of operations, 30% in the second calendar year and 50% in the third calendar year, effectively reducing the company’s liability for crown royalties.

Given that the credits are transferable, AZL can generate early cash flow by selling them to other companies that pay royalties in Saskatchewan.

In addition to the Prairie Lithium Project, the company is developing the Big Sandy Lithium Project in North America.

The AZL Prairie Lithium Project is located in the Williston Basin of Saskatchewan, Canada, and holds a resource of 6.3 million tonnes (mt) of lithium carbonate equivalent (LCE), including 4.5mt LCE indicated and 1.8mt LCE inferred.

The company noted that the project benefits from access to essential infrastructure, including electricity, highways, railroads, natural gas, as well as fresh water.

AZL managing director Paul Lloyd said: “I am very pleased to share that Pad #1 at the Prairie Project has been conditionally approved for up to $21.6m in investment incentives. Saskatchewan is a top-ranked jurisdiction and is committed to responsible economic development of its resources.

“This conditional approval under the OGPII Program is a testament to how the province works with industry to find solutions to economic growth, and we are grateful to work with the governing bodies and operate our project there.

“This is one of the many development funding tools we have access too, which is a non-dilutive benefit to shareholders.”