Liontown Resources (ASX: LTR) has inked a binding sales and purchase term sheet with major EV manufacturer Tesla for the supply of spodumene concentrate from its Kathleen Valley Lithium Project in Western Australia.
The 5-year deal will see Tesla purchase up to 150,000 dry metric tonnes of spodumene concentrate per year beginning in 2024, and will account for around one third of the project’s start-up SC6.0 production capacity. Pricing under the agreement will be determined by a formula linked to market prices for Lithium Hydroxide Monohydrate.
The company notes that the agreement is conditional upon commencement of commercial production at Kathleen Valley by 2025, and is subject to further negotiations and agreements.
Commenting on the news, Liontown Resources Managing Director and CEO Tony Ottaviano, said: “Securing our second offtake sales agreement is another fantastic milestone for Liontown towards the development of the Kathleen Valley Lithium Project, and we are absolutely delighted to have signed this agreement with leading EV manufacturer, Tesla.
Tesla is a global leader and innovator in electric vehicles and having it sign up to become a significant customer is a tremendous achievement and another huge vote of confidence in the quality of the Kathleen Valley Project. This means that we now have two of the premier companies in the global lithium-ion battery and EV space signed up as foundational customers, marking a significant step towards realising our ambition to become a globally significant provider of battery materials for the clean energy market. Our shareholders should be proud that future Tesla cars will be powered by Liontown lithium.
“having [Tesla] sign up to become a significant customer is a tremendous achievement and another huge vote of confidence in the quality of the Kathleen Valley Project”
We look forward to working with Tesla as long-term partners for many years to come.
We are also continuing to progress discussions with additional potential customers for the remaining available production and we are looking forward to announcing additional arrangements in the weeks ahead as we continue to implement our strategy to develop the project and deliver value for our shareholders.”
This is the second offtake agreement secured for Kathleen Valley output following a deal with LG Energy Solution, announced in January 2022. The combined agreements will see more than half of the project’s product covered by long-term agreements.
Kathleen Valley, situated approximately 680km north-east of Perth, is described by Liontown as a ‘globally significant’ lithium development encompassing a ‘world-class’ lithium MRE of 156Mt @ 1.4% Li2O and 130ppm Ta2O5.
The project is expect to kick off production with around 500ktpa of SC6.0 spodumene concentrate, expanding to circa 700ktpa.
Major construction at the $473 million project is scheduled to begin in Q4 2022, and comes following the completion of a Definitive Feasibility Study in late 2021 which forecasted a post-tax Net Present Value of A$4.2 billion, at an Internal Rate of Return of 57%
The project’s current Ore Reserve supports an initial mine life of 23 years, with further expansions expected.
