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Core Lithium Limited (ASX: CXO) announced on 1st April 2019 that the Ya Hua International Investment and Development Co. (Yahua) increased lithium offtake commitment from the company. The company expanded the offtake binding agreement with Yahua for its wholly-owned Finniss Lithium Project which contains the BP33 Lithium orebody in Darwin.
Yahua is one of Chinaâs largest LiOH and carbonate producers, 100% owned by Sichuan Yahua Industrial Group Co., Ltd, which is a Shenzhen-stock-exchange listed company (market value of A$2 billion).
As per the company, an increase in offtake from the subsidiary of Sichuan Yahua demonstrate their support for the Finniss project as the company position itself to be Australiaâs next lithium producer.
Offtake Agreement:
As per the Offtake Agreement, the company will supply lithium oxide concentrate to Yahua from the Mineral Lease and exploration license that contains the Grants and BP33 Lithium deposits. Core will deliver 300k dry metric tonnes of lithium oxide concentrate till 30th November 2023.
As per the company, the agreement provides an attractive price as compared to the market for 6.0% Free-on-Board (FOB) spodumene concentrate, and it also contains a price floor and ceiling for the first two years which is agreed between both counterparts. The pricing provided by the agreement and agreed ceiling and floor safeguards operating margin during the commissioning and capital payback period.
Core also mentioned that the agreement accounts for almost 40% of the Grants and BP33 production over the Life-of-Mine (LOM), which in turn underpins the Grants and BP33 orebody deposit production.
As per the company, the 40% agreed sales of the lithium oxide produced from the Grants and BP33 provides great confidence to the company to fast-track the development of the mine, and it also signifies a tremendous value for the company in early stage project revenues over the term of the Offtake Agreement.
Core provided Yahua a first right of refusal over lithium oxide concentrate offtake up to the greater of 300K tonnes lithium oxide concentrate or 50% of the forecast annual production, as part of the Offtake Agreement.
Core recently intersected high-grade lithium at BP33 orebody.
As per the increased Offtake Agreement, the offtake is now increased to 75,000 tonnes per annum of 5.5% lithium oxide concentrate.
As per the agreement, the offtake of lithium oxide concentrates ends, when the company completes the delivery of 300,000 tonnes of lithium oxide concentrate to Yahua with the deadline of 30th November 2023. The agreement will be subjected to extension upon the mutual agreement between the two counterparts.
As per the Managing Director of the company, Stephen Biggins, the signing of the agreement for the Finniss Lithium Project is a significant milestone for the company as it represents strong relationship Core has developed with customers and high-quality chemical converters in Asia. Mr. Biggins also mentioned that the agreement further de-risks the development plans of the company and secures and supports project funding.
Outlook Ahead:
The company is now looking continuously for additional potential offtake partners. Core is focussed on extending the sales from the Finniss project ahead of Financial Final Investment Decision (FID).
Trading of the companyâs shares resumed post the announcement on 1st April, which were placed on a trading halt on 29th March 2019. The shares of the company closed at A$0.056 (as on 1st April 2019), up by 3.704% as compared to its previous close. Today, 2nd April 2019, the stock is trading at A$0.055, down by 1.786% (As at 1:00 PM AEST).
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