Lithium explorer, Kidman Resources Limited (ASX: KDR) has entered into a non-binding Memorandum of Understanding with LG Chem in relation to the supply of 12kt of lithium hydroxide per annum to LG Chem over a term of 10 years. Following this news, the share price of the company decreased by 4.0 percent on 19 December 2018.
Kidman Resources and LG Chem have both agreed to work towards the execution of a binding Strategic Supply Agreement by 31 July 2019. This Memorandum of Understanding (MOU) with LG Chem is representing around 50 percent of Kidman’s share of lithium hydroxide production of 22.6kt per annum.
Earlier in November 2018, Kidman had announced binding Heads of Agreement with Mitsui & Co. Ltd and before that in the month of May 2018, Kidman had announced offtake agreement with Tesla, Inc. And with this new Non- binding MOU with LG Chem, the company has achieved another significant milestone towards its objective of securing offtake arrangements over approximately 75% of its share of production in the initial years of the Mt Holland Lithium Project.
LG Chem is the world’s leading automotive battery supplier, and it will continue to be a major supplier to the rapidly growing electric vehicle segment. While commenting on the MOU with LG Chem, Kidman’s CEO and Managing Director (MD) Mr. Martin Donohue said that having such a high-quality offtake counterparty provides further support for the company’s ongoing discussions related to the provision of debt facilities with prospective lenders.
Currently, Kidman is in 50:50 joint venture with Sociedad Quimica y Minera de Chile S.A (SQM) with regards to the development of Mt Holland Lithium Project. Recently on 18 December 2018, SQM completed its milestone payments in respect of its earn in to the Mt Holland Lithium project by paying US$25mn to Kidman and US$60mn to the Covalent Lithium joint venture.
Recently, Kidman has completed its integrated pre-feasibility study (IPFS) for the Mt Holland Lithium Project following a pre-feasibility study on the proposed Kwinana Lithium Refinery and an updated scoping study on the proposed Mt Holland lithium mine and concentrator.
The integrated pre-feasibility study has confirmed the compelling outcomes from the previous studies on the Refinery and the Mine & Concentrator, and it reported outstanding project economics, in line with the previous studies. As per IPFS, the project is having a post-tax NPV10% (nominal) of US$2.2bn a strong IRR of 26.6 percent. IPFS has reported an integrated capex of US$737 million (Kidman share: US$368 million) and C1 cash operating cost of US$4,507/t LiOH. After the completion of IPFS, Kidman is now planning to conduct a Definitive Feasibility Study which is expected to be completed in 1H 2019.
Meanwhile, the share price of Kidman decreased by 35.06 percent in the past six months as on 18 December 2018. KDR’s shares traded at $1.200 with a market capitalization of circa $499.45 million as on 19 December 2018 (AEST 1:50 PM).
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